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8-K - FORM 8-K - MAGNUM HUNTER RESOURCES CORP | h85367e8vk.htm |
Exhibit 99.1
Magnum Hunter Clarifies July 14, 2011 Press Release
FOR IMMEDIATE RELEASE Houston, TX (Market Wire) October 28, 2011 Magnum Hunter
Resources Corporation (NYSE: MHR) (NYSE Amex: MHR-PrC) (NYSE Amex: MHR-PrD) (the Company or
Magnum Hunter) is issuing this press release in Canada to provide to its Canadian stockholders
the following clarifications to its estimated mid-year 2011 resource potential announced in a press
release on July 14, 2011. Although the Companys use in the July 14, 2011 press release of the
term resource potential is permitted under United States securities laws, such disclosure differs
from the disclosure permitted under Canadian law. The Companys disclosure of such resource
potential in the July 14, 2011 press release included volumes attributable both to possible
reserves, a reserve classification used both in Canada and the United States, and to contingent
resources, disclosure of which is permitted under Canadian securities legislation.
As noted above, the July 14, 2011 press release provided an estimate of resource potential, which
the Company is clarifying by breaking out separately the estimates of reserves and contingent
resources discussed under the corresponding headings below.
The estimates of U.S. SEC compliant and Canadian NI 51-101 compliant proved and probable reserves
below were prepared by Independent Qualified Reserves Evaluators. All other estimates of reserves
and contingent resources below are Magnum Hunters management estimates and were not prepared by an
Independent Qualified Reserves Evaluator.
Reserves
Magnum Hunters estimated reserves at June 30, 2011 consisted of the following:
MMBOE | MMBOE | |||||||||||
(U.S. SEC Compliant) | (Canadian NI 51-101 Compliant) | |||||||||||
Reserves | Net basis (after royalties) | Gross basis (before royalties) | Net basis (after royalties) | |||||||||
Proved |
31.2 | 76.2 | 36.8 | |||||||||
Probable |
3.6 | 4.2 | 3.4 | |||||||||
Proved Plus Probable |
34.8 | 80.4 | 40.2 | |||||||||
Possible |
412.0 | 558.6 | 412.0 | |||||||||
Proved Plus Probable |
446.8 | 639.0 | 452.2 | |||||||||
Plus Possible |
For summary definitions of proved, probable and possible reserves and information on Canadian NI
51-101 requirements, see Information Regarding Disclosure of Reserves and Contingent Resources
below.
Contingent Resources
Magnum Hunters internal technical team consisting of engineers and geologists has provided its
estimates of the contingent resources of the Companys undeveloped lease acreage position in the
unconventional shale plays as of June 30, 2011. The undeveloped acreage evaluated includes 652,419
gross acres and 347,547 net acres to Magnum Hunters ownership interest. The low, best and high
estimates of the Companys contingent resources are summarized by region as follows:
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MMBOE | ||||||||||||||||
Subsidiary | Reservoir | Low Estimate1 | Best Estimate1 | High Estimate1 | ||||||||||||
Eagle Ford Hunter |
Eagle Ford | 4 | 6 | 9 | ||||||||||||
NGAS Hunter |
Devonian Shale (Huron/Weir) |
22 | 44 | 88 | ||||||||||||
TOTALS: | 26 | 50 | 97 |
Contingent resources are not, and should not be confused with, oil and gas reserves. See
Information Regarding Disclosure of Reserves and Contingent Resources below.
Drilling Locations
As of June 30, 2011, Magnum Hunter had an inventory of approximately 4,000 drilling locations of
which 1,350 are net to the Companys interest. The estimated number of drilling locations does not
represent the drilling plans of Magnum Hunter but represents the aggregate number of potential
drilling locations on Magnum Hunter leases associated with the disclosed reserves and resources,
based on Magnum Hunters own internal evaluation of the best drilling locations taking into account
petroleum engineering, geologic and other factors. Magnum Hunter drilled 9 gross (7.97 net) wells
in 2010 and drilled 41 gross (16.97 net) wells in the first nine months of 2011 and expects to
drill a generally comparable number of wells on an annualized basis during the fourth quarter of
2011 and in 2012.
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, development and production of oil
and natural gas, primarily in the states of West
Virginia, Kentucky, Ohio, Texas, North Dakota and Saskatchewan, Canada. The Company is presently
active in three of the most prolific shale resource plays in North America, namely the Marcellus
Shale, Eagle Ford Shale and Williston Basin/Bakken Shale. For more information, please view our
website at http://www.magnumhunterresources.com/.
Information Regarding Disclosure of Reserves and Contingent Resources
Reserves. The U.S. Securities and Exchange Commission (SEC) requires oil and natural gas
companies, in filings made with the SEC, to disclose proved reserves, which are those quantities
of oil and natural gas that by analysis of geoscience and engineering data can be estimated with
reasonable certainty to be economically producible from a given date forward, from known
reservoirs, and under existing economic conditions, operating methods, and government regulations.
The SEC defines (i) probable reserves as additional reserves that are less certain to be
recovered than proved reserves but which, together with proved reserves, are as likely as not to be
recovered and (ii) possible reserves as those additional reserves that are less certain to be
recovered than probable reserves. Under Canadian
1 | For definitions of low estimate, best estimate and high estimate, see Information Regarding Disclosure of Reserves and Contingent Resources. The 462 MMBOE of resource potential as of June 30, 2011 in Magnum Hunters July 14, 2011 press release consisted of 412 MMBOE of possible reserves, 6 MMBOE of contingent resources attributable to Eagle Ford and 44 MMBOE of contingent resources attributable to the Devonian Shale (Huron/Weir). |
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rules, possible reserves are those reserves
that are less certain to be recovered than probable reserves. Under such Canadian rules there is
at least a 10% probability that the quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible reserves.
Contingent Resources. Contingent resources are defined in the Canadian Oil and Gas Evaluation
Handbook as those quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology or technology under development,
but which are not currently considered to be commercially recoverable due to one or more
contingencies. Contingencies may include factors such as economic, legal, environmental, political
and regulatory matters or a lack of markets. It is also appropriate to classify as contingent
resources the estimated discovered recoverable quantities associated with a project in the early
evaluation stage.
Any references to contingent resources in this press release have been determined in accordance
with Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI
51-101). The term contingent resources is a broader description of potentially recoverable
volumes than proved, probable and possible reserves, as defined by the SEC regulations. Estimates
of contingent resources are by their nature more speculative than estimates of proved reserves and
accordingly are subject to substantially greater risk of actually being realized by the Company.
The estimate of contingent resources contained herein is as of June 30, 2011. We believe our
estimates of contingent resources are reasonable, but such estimates have not been reviewed by
independent engineers. Estimates of contingent resources may change significantly as development
provides additional data, and actual quantities that are ultimately recovered may differ
substantially from prior estimates. There is no
certainty that it will be commercially viable for Magnum Hunter to produce any portion of its
contingent resources or that Magnum Hunter will produce any portion of the volumes currently
classified as contingent resources. The primary contingencies which currently prevent the
classification of Magnum Hunters disclosed contingent resources as reserves consist of current
uncertainties around the specific scope and timing of project development, commercial recovery
being dependent on technology under development, the absence of a reasonable assessment of future
economics meeting defined investment and operating criteria, other economic criteria, the
uncertainty regarding marketing plans for production from the subject areas, improved estimation of
project costs, capital costs required to render production economic, applicable regulatory
considerations, pricing and supply costs. There are a number of inherent risks and contingencies
associated with the development of these resources, including commodity price fluctuations, project
costs, receipt of regulatory approvals and those other risks and contingencies described above and
under Risk Factors in our Form 10-K/A dated March 15, 2011, a copy of which is filed with the SEC
and is available at www.sec.gov.
Contingent Resources Uncertainty Categories. Under the applicable Canadian rules, contingent
resources are estimated using a low estimate, best estimate, or high estimate. These terms
are defined as follows:
Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate assuming all contingencies have been eliminated. |
Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate assuming all contingencies have been eliminated. |
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High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate assuming all contingencies have been eliminated. |
United States/Canadian Distinctions for Reporting Reserves. Any references to reserves in this
press release under the caption U.S. SEC Compliant have been determined in accordance with the
guidelines of the SEC (U.S. Rules) and not in accordance with NI 51-101. Any references to
reserves in this press release under Canadian 51-101 Compliant have been determined in accordance
with NI 51-101. The practice of preparing production and reserve quantities data under NI 51-101
differs from the U.S. Rules. The primary differences between the two reporting requirements
include: (i) NI 51-101 requires disclosure of proved and probable reserves; the U.S. Rules require
disclosure of only proved reserves; (ii) NI 51-101 requires the use of future forecast prices in
the estimation of reserves; the U.S. Rules require the use of 12-month average prices which are
held constant; (iii) NI 51-101 requires disclosure of reserves on a gross (before royalties) and
net (after royalties) basis; the U.S. Rules require disclosure on a net (after royalties) basis;
(iv) the Canadian standards require disclosure of production on a gross (before royalties) basis;
the U.S. Rules require disclosure of production on a net (after royalties) basis; and (v) NI 51-101
requires that reserves and other data be reported on a more granular product type basis than
required by U.S. Rules.
Conversion Ratio for BOE Calculations. In computing BOEs (barrels of oil equivalent), gas was
converted to oil in the ratio of 6 Mcf of gas to 1 bbl of oil. BOEs may be misleading,
particularly if used in isolation. A BOE conversion ratio of 6 Mcf to 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Furthermore, the use of an energy equivalent 6:1 conversion factor
might lead to an overstatement of the value of such reserves when the value ratio is currently
closer to 20:1, particularly for companies whose reserves are mainly gas. As of June 30, 2011
approximately 49% of Magnum Hunters reserves and contingent resources was attributable to oil or
natural gas liquids using the above 6 Mcf to 1 bbl energy equivalency conversion method.
Forward-Looking Statements
The statements and information contained in this press release that are not statements of
historical fact, including all estimates and assumptions contained herein, are forward looking
statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended and forward-looking information as defined under
Canadian securities laws (collectively, Forward-Looking Statements). These Forward-Looking
Statements include, among others, statements, estimates and assumptions relating to our business
and growth strategies, our oil and gas reserve estimates, our ability to successfully and
economically explore for and develop oil and gas resources, our exploration and development
prospects, future inventories, projects and programs, expectations relating to availability and
costs of drilling rigs and field services, anticipated trends in our business or industry, our
future results of operations, our liquidity and ability to finance our exploration and development
activities, market conditions in the oil and gas industry and the impact of environmental and other
governmental regulation. Forward-Looking
Statements generally can be identified by the use of forward-looking terminology such as may,
will, could, should, expect, intend, estimate, anticipate, believe, project,
pursue, plan or continue or the negative thereof or variations thereon or similar
terminology. These Forward-Looking Statements are subject to numerous assumptions, risks, and
uncertainties. Factors that may cause our actual results, performance, or achievements to be
materially different from those anticipated in Forward-Looking Statements include, among other, the
following: adverse economic conditions in the United States and globally; difficult and adverse
conditions
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in the domestic and global capital and credit markets; changes in domestic and global
demand for oil and natural gas; volatility in the prices we receive for our oil and natural gas;
the effects of government regulation, permitting, and other legal requirements; future developments
with respect to the quality of our properties, including, among other things, the existence of
reserves in economic quantities; uncertainties about the estimates of our oil and natural gas
reserves; our ability to increase our production and oil and natural gas income through exploration
and development; our ability to successfully apply horizontal drilling techniques and tertiary
recovery methods; the number of well locations to be drilled, the cost to drill, and the time frame
within which they will be drilled; drilling and operating risks; the availability of equipment,
such as drilling rigs and transportation pipelines; changes in our drilling plans and related
budgets; and the adequacy of our capital resources and liquidity including, but not limited to,
access to additional borrowing capacity. Because Forward-Looking Statements are subject to risks
and uncertainties, actual results may differ materially from those expressed or implied by such
statements. Readers are cautioned not to place undue reliance on Forward-Looking Statements,
contained herein, which speak only as of the date of this document. Other unknown or unpredictable
factors may cause actual results to differ materially from those projected by the Forward-Looking
Statements. Unless otherwise required by law, we undertake no obligation to publicly update or
revise any Forward-Looking Statements, including estimates, whether as a result of new information,
future events, or otherwise. We urge readers to review and consider disclosures we make in our
public filings made from time to time with the Securities and Exchange Commission that discuss
factors germane to our business, including our Annual Report on Form 10-K, as amended for the year
ended December 31, 2010 and our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2011 and June 30, 2011. All Forward-Looking Statements attributable to us are expressly qualified
in their entirety by these cautionary statements.
Magnum Hunter Contact:
M. Bradley Davis
Senior Vice President of Capital Markets
bdavis@magnumhunterresources.com
(832) 203-4545
M. Bradley Davis
Senior Vice President of Capital Markets
bdavis@magnumhunterresources.com
(832) 203-4545
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