Magnum Hunter Resources Corporation (NYSE Amex: MHR) and (NYSE
Amex: MHR-PC) ("Magnum Hunter", or the "Company") announced today
that it has entered into a definitive agreement to acquire
Appalachian Basin focused NGAS Resources, Inc. (NASDAQ: NGAS) for
approximately $98 million (USD) in common stock and assumed
liabilities. Magnum Hunter has agreed to acquire NGAS for $0.55 per
share with a fixed exchange ratio of 0.0846 based on an agreed
Magnum Hunter stock price of $6.50 per share. (There are no collars
on the fixed exchange ratio based on the trading price of either
Magnum Hunter and/or NGAS).
Magnum Hunter will issue approximately 6.6 million shares,
representing approximately 8% of Magnum Hunter's fully diluted
shares outstanding. The assumed liabilities will be refinanced
under a new senior credit facility with an initial borrowing base
of $120 million, to be provided by BMO Capital Markets Corp.
("BMO"). Each company's respective Board of Directors has given
their unanimous approval of the transaction. BMO acted as Financial
Advisor and Capital One Southcoast, Inc. provided a Fairness
Opinion to Magnum Hunter's Board of Directors. Fulbright &
Jaworski L.L.P. acted as Legal Advisor to Magnum Hunter.
Transaction Overview:
MHR Shares to be Issued
- 4.2 million MHR common shares, or approximately $27.3 million,
issued to NGAS shareholders
- 2.4 million MHR common shares, or approximately $15.9 million,
issued to certain holders of NGAS' 6% Convertible Notes which are
expected to convert into NGAS common shares at or prior to
Closing
- $10 million payment to a third-party to restructure an
"out-of-market" gas gathering and transportation agreement through
issuance of MHR common shares at closing
Liabilities and Other Items
- Senior credit facility with approximately $35.2 million
outstanding
- Approximately $14.7 million in remaining NGAS 6% Convertible
Notes to be paid off at Closing
- Other long-term debt of about $6.3 million to be assumed
- Cash and positive working capital of approximately $11.6
million as of September 30, 2010
NGAS is a British Columbia corporation, therefore a Plan of
Arrangement (Canadian Plan of Merger) will be filed in British
Columbia in order to complete the transaction. Such Plan requires a
two-thirds favorable vote for the transaction by the NGAS common
shareholders and the issuance of a favorable Final Order by the
Supreme Court of British Columbia. NGAS intends to distribute a
Proxy Statement as soon as practicable to all NGAS common
shareholders announcing a shareholder meeting whereby NGAS common
shareholder approval of this transaction will be sought. Issuance
of Magnum Hunter common stock will be exempt from U.S. Securities
and Exchange Commission registration requirements due to the
aforementioned Canadian court approval. The transaction is expected
to close by March 31, 2011 or soon after that date.
Asset Overview
- Proved reserves of 78.4 Bcfe as of December 31, 2009 (74%
natural gas and 65% PDP)
- Long-lived reserves, with an R/P ratio of 23.4 years
- Daily production of approximately 9.2 MMcfe as of September 30,
2010
- Approximately [360,000] net lease acres (68% undeveloped)
Transaction Highlights
- Multi-year inventory of approximately 2,400 identified low-risk
horizontal drilling locations (historical success ratio of
98%)
- Ability to achieve an estimated $7 million to $8 million of
synergies and cost reductions through restructured gas
transportation agreement, consolidation of G&A with Triad
Hunter, elimination of public company expenses and possible
spin-off of NGAS' broker-dealer business to a third-party
management group
- Exposure to highly attractive Huron Shale
- Additional liquids potential in emerging Weir oil play
- Highly accretive to reserves, production and cash flow per
share
- Ability to hold significant lease acreage without substantial
drilling expenditures through HBP acreage and utilization of future
Partnership funds
Management Comments
Gary C. Evans, Chairman and CEO of Magnum Hunter Resources
Corporation commented, "We have been studying the possibility of a
business combination with NGAS for most of 2010. I am very pleased
to make this announcement today that our goal has been
accomplished. This transaction enables our combined enterprise to
own high-quality, long-lived proved developed producing assets with
significant development upside covering approximately 300,000
acres. We believe the combination provides tremendous value for
both companies' shareholders. At Closing, all financial measures
are accretive to our shareholder base. Additionally, Magnum
Hunter's upside exposure in one of our three existing core areas,
the Appalachian Basin, is substantially increased with the addition
of NGAS to our portfolio. Significant cost savings from duplicative
business operations and anticipated synergies will create
substantial value accretion for the combined entity. The Company's
acquisition of NGAS essentially creates a long dated call option in
natural gas while we continue to develop some of our other high
return resource plays. We have been impressed with the operating
team at NGAS including the land, geology, and engineering
professionals and see this group assisting our future growth plans
for the combined enterprise. We look forward to working with the
NGAS management team and Board of Directors toward final closing in
early 2011."
About NGAS Resources, Inc.
NGAS Resources, Inc. is a Lexington, Kentucky based independent
exploration and production company focused on unconventional
resources plays in the eastern United States, principally within
the southern Appalachian Basin. Core assets include approximately
300,000 net developed and undeveloped acres and interests in
approximately 1,400 producing crude oil and natural gas wells. The
company's recent drilling success ratio is approximately 98%. NGAS
also operates natural gas gathering and processing assets and
facilities associated with the company's core Appalachian producing
properties. Upside exposure resides in the following unconventional
resources plays: the Huron Shale, the Weir Oil Sands, and the
Cleveland Shale.
Conference Call Information
Magnum Hunter will hold a conference call on Monday, December
27th at 10:00 AM Central Time to discuss the transaction, and other
matters, including the additional announcement made this morning
regarding a definitive agreement for an acquisition by it of
certain Marcellus Shale properties.
Dial-In number: (866) 348-0480 (U.S. & Canada) or (706)
643-5340 (Intl./Local) Access code: 34256229
A simultaneous webcast of the call may be accessed over the
internet by visiting our website at
http://us.meeting-stream.com/magnumhunter_122710. The webcast will
be archived for replay on the Magnum Hunter website for 90
days.
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 of exploratory leases and producing
properties, secondary enhanced oil recovery projects, exploratory
drilling, and production of oil and natural gas in the United
States. The Company is presently active in three of the "big five"
emerging shale plays in the United States.
For more information, please view our website at
http://www.magnumhunterresources.com/
Forward-Looking Statements
This press release contains statements concerning Magnum Hunter
Resources Corporation's expectations, beliefs, plans, intentions,
objectives, goals, strategies, future events or performance and
underlying assumptions and other statements that are not historical
facts. These statements and others contained in this presentation
that are not historical are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the Private Securities
Litigation Reform Act of 1995 (the "Litigation Reform Act"). Actual
results may differ materially from those expressed or implied by
these statements. You can generally identify our forward-looking
statements by the words "anticipate", "believe" ,"continue",
"could", "estimate", "expect", "forecast", "goal", "intend", "may",
"objective", "plan", "potential", "predict", "projection",
"should", "will", or other similar words. Such forward-looking
statements relate to, among other things: (1) statements regarding
the expected timing of the completion of the proposed transaction,
(2) the ability to complete the proposed transaction considering
the various closing conditions, (3) the benefits of such
transaction and its impact on Magnum Hunter's business, (4) the
Company's proposed exploration and drilling operations on its
various properties, (5) the expected production and revenue from
its various properties, (6) the Company's proposed redirection as
an operator of certain properties and (7) estimates regarding the
reserve potential of its various properties. These statements are
qualified by important factors that could cause the Company's
actual results to differ materially from those reflected by the
forward-looking statements. Such factors include but are not
limited to: (1) the risk to both companies that the proposed
transaction will not be consummated, (2) failure to satisfy any of
the conditions to the proposed transaction, (3) adverse effects on
the market prices of the parties' common stock and on operating
results because of a failure to complete the proposed transaction,
(4) failure to realize the expected benefits of the proposed
transaction, (5) negative effects of announcement or consummation
of the proposed transaction on the market price of the parties'
common stock, (6) significant transaction costs and or unknown
liabilities and general economic and business conditions that
affect the parties following the proposed transaction, (7) the
Company's ability to finance the continued exploration, drilling
and operation of its various properties, (8) positive confirmation
of the reserves, production and operating expenses associated with
its various properties, (9) the general risks associated with oil
and gas exploration, development and operations, including those
risks and factors described from time to time in the Company's
reports and registration statements filed with the Securities and
Exchange Commission, including but not limited to the Company's
Annual Report on Form 10-K for the period ended December 31, 2009
filed on March 31, 2010, and the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and
September 30, 2010 and, filed on May 17, 2010, August 12,2010 and
November 12, 2010, respectively. Magnum Hunter Resources
Corporation cautions readers not to place undue reliance on any
forward-looking statements. Magnum Hunter Resources Corporation
does not undertake, and specifically disclaims any obligation, to
update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
Additional Information about the Proposed
Transaction
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there by
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
In connection with the proposed transaction, NGAS Resources, Inc.
will file a proxy statement and NGAS Resources, Inc. and Magnum
Hunter Resources Corporation will file other relevant materials
with the SEC. INVESTORS AND SECURITY HOLDERS OF NGAS RESOURCES,
INC. ARE URGED TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT
MATERIALS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY
BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION
WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE
PARTIES THERETO.
Investors and security holders may obtain a free copy of the
proxy statement and other relevant materials when they become
available and any other documents filed by Magnum Hunter Resources
Corporation and NGAS Resources, Inc. with the SEC, at the SEC's
website at www.sec.gov. The proxy statement and such other
documents filed by NGAS Resources Inc. may also be obtained for
free by contacting NGAS Resources, Inc. at 959-263-3948 or 120
Prosperous Place, Suite 201, Lexington, Kentucky 40509-1844 or
visiting NGAS Resources, Inc.'s website at www.ngas.com. Copies of
any materials filed by Magnum Hunter Resources Corporation may also
be obtained for free by contacting Magnum Hunter Resources
Corporation at 832-369-6986 or 777 Post Oak Boulevard, Suite 910,
Houston, Texas 77056 Attention: Investor Relations or visiting
Magnum Hunter Resources Corporation's website at
www.magnumhunterresources.com.
Participants in the Solicitation
Magnum Hunter Resources Corporation, NGAS Resources, Inc. and
their respective directors, executive officers and other members of
management and employees, under SEC rules, may be deemed to be
participants in the solicitation of proxies of NGAS Resources, Inc.
shareholders in connection with the proposed transaction. Investors
and security holders may obtain more detailed information regarding
the names, affiliations and interests of certain of Magnum Hunter
Resources Corporation's executive officers and directors in the
solicitation by reading the proxy statement for Magnum Hunter
Resources Corporation's 2010 Annual Meeting of Shareholders, which
was filed with the SEC on September 3, 2010, and the proxy
statement relating to the proposed transaction and other relevant
materials filed with the SEC when they become available. Investors
and security holders may obtain more detailed information regarding
the names, affiliations and interests of NGAS Resources, Inc.'s
executive officers and directors in the solicitation by reading the
proxy statement for NGAS Resources, Inc.'s 2010 Annual Meeting of
Shareholders, which was filed with the SEC on April 29, 2010, and
the NGAS Resources, Inc.'s proxy statement relating to the proposed
transaction and other relevant materials to be filed with the SEC
when they become available. Certain executives and directors of
NGAS Resources, Inc. have interests in the proposed transaction
that may differ from the interests of NGAS Resources, Inc.'s
shareholders generally, including benefits conferred under
severance, retention and change of control arrangements and
continuation of director and officer insurance and indemnification.
These interests and any additional benefits in connection with the
proposed transaction will be described in the proxy statement when
it becomes available.
Magnum Hunter Contact: M. Bradley Davis Senior Vice
President of Capital Markets bdavis@magnumhunterresources.com (832)
203-4545
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