Magnum Hunter Resources, Inc. has entered into a mutually binding commitment to sell certain non-core oil and gas assets to a new private limited partnership in the approximate amount of $50 million. General Electric Capital Corporation ("GE Capital") will be a limited partner with a 95% initial ownership and Magnum Hunter will be the general partner with a 5% initial ownership. Upon the limited partner payout (estimated to be approximately 10 years) including a certain pre-tax rate of return, Magnum Hunter's ownership as general partner will increase to 37.63%. The effective date of the properties to be sold to the partnership is August 1, 2002.
It is anticipated that closing of this transaction will be completed on or about August 31, 2002, once legal documentation and environmental due diligence has been concluded. The final sales price may be adjusted based upon the value of commodity price hedges completed at the time of closing.
Commenting on this new transaction with GE Capital, Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "This is the second partnership that Magnum Hunter has formed with GE Capital over the last several years. There are approximately 1,750 wells that will be sold to this partnership and two-thirds of the value is operated by Gruy Petroleum Management Co., a wholly-owned subsidiary of Magnum Hunter. The proved reserves are 51% crude oil and 49% natural gas. Predominately all of these properties were acquired in our merger with Prize Energy, which was completed in March 2002. Given the relative strength of the forward commodity price curves to historical prices, we believe the timing of this divestiture of non-core assets takes advantage of the favorable current market conditions. There is a real disconnect in the market today with respect to the value of hard assets in the private energy sector versus public evaluations. The net proceeds to be received at closing will go to further reduce Magnum Hunter's existing commercial bank indebtedness as we seek to achieve our goal of a 50% debt-to-equity ratio."