Magnum Hunter: Proposed Acquisition in Williston Basin Did Not Close

- Magnum Hunter: Proposed Acquisition in Williston Basin Did Not Close

Friday, August 19, 2011
Magnum Hunter Resources Corp.

Magnum Hunter announced that the previously announced proposed acquisition by its wholly owned subsidiary, Williston Hunter ND, LLC, of oil and gas properties in the Williston Basin in North Dakota from Eagle Operating, Inc. ("Eagle") did not close yesterday due to unresolved issues between the parties resulting from what Magnum Hunter considers to be Eagle's intentional and bad faith breach of its obligations under the Purchase and Sale Agreement ("PSA"). In the proposed acquisition, Magnum Hunter would have acquired from Eagle for total consideration of $57 million ($55 million in cash and $2 million in Magnum Hunter restricted common stock), the remaining approximate 48% working ownership interest in the Williston Basin properties owned by Eagle, subject to Eagle's retention of a variable overriding royalty interest not exceeding 2% on certain properties.

The acquisition would also have resulted in the settlement of two pending lawsuits between the Company and Eagle currently filed in the United States District Court for the District of North Dakota (Northwestern Division), which litigation is now expected to continue. Management of Magnum Hunter does not consider this pending litigation to be of any material nature to the Company.

Magnum Hunter has today filed a new lawsuit against Eagle in the United States District Court for the District of North Dakota (Northwestern Division) asking the court to order Eagle to comply with its obligations under the PSA and complete the sale of the properties to the Company on the specific terms outlined in the PSA. Magnum Hunter is also seeking monetary damages, including compensatory, consequential and general damages, for Eagle's material default under the PSA. The Company intends to vigorously pursue all available remedies against Eagle.

As of August 18, 2011, Magnum Hunter had total liquidity including cash and availability under its various credit facilities of approximately $75 million, of which approximately $55 million is currently available to continue to fund its upstream capital program focused on the Company's high growth unconventional resource plays. In addition, Magnum Hunter has a commitment from its bank group to provide an additional $42.5 million in borrowing capacity for the purchase of the Eagle properties referenced above. Moreover, Magnum Hunter continues to pursue various non-dilutive alternatives to provide access to capital in order to fund capital budget needs later in fiscal year 2012.

Additional information regarding the Company's lawsuit against Eagle, including a copy of the complaint filed by the Company Friday in the United States District Court for the District of North Dakota (Northwestern Division), is contained in a Report on Form 8-K also filed today by the Company with the Securities and Exchange Commission.

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Proposed Shale Gas Development Stirs Passions in Poland

- Proposed Shale Gas Development Stirs Passions in Poland

Thursday, July 14, 2011
OilPrice.com
by Joao Peixe

Energy-poor Poland is about to embark upon using hydraulic fracturing to develop the country's natural gas reserves. The practice is controversial in many countries, including the U.S., because of its potential impact on the environment, particularly groundwater. Many municipalities and counties in the U.S. have adopted stringent regulations as a result.

Poland's Petrolinvest has formed a joint venture, Silurian-Hallwood, with the U.S.-based Hallwood Energy to begin shale gas extraction after funding is raised, Rzeczpospolita newspaper reported.

Silurian-Hallwood is currently attempting to raise $90-100 million, of which, $20-25 million will come from private investment with the remaining $70-75 million from an initial public offering (IPO) prior to the company being listed on London's Alternative Investment Market (AIM) later this year.

Author Jacek Skorupski observed, "Shale gas is a matter of a political nature. If we treat it like any other investment, we will be faced with mounting difficulties."

Deputy Environment Minister Jacek Jezierski ambiguously noted, "We will be able to say whether amendments to provisions regulating shale gas extraction are needed once we perform a professional assessment of its environmental impact, not an emotional one. Poland intends to control this process, not to ban it."

Marek Kryda of the Institute of Civil Affairs emphasized, "It is necessary to look after issues related to property expropriation and lease. We can already see irregularities at the stage of test drilling."

(Joao Peixe is Deputy Editor with OilPrice.com. The original article appears here.)

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Proposed Drilling Fee May Piggyback on Budget Bill

- Proposed Drilling Fee May Piggyback on Budget Bill

Thursday, June 16, 2011
Knight Ridder/Tribune Business News
by Brad Bumsted, The Pittsburgh Tribune-Review

A Bucks County legislator said she will try to attach her proposed impact fee on deep natural gas wells to a budget companion bill that allows the state to raise revenue.

Her bill normally would have difficulty maneuvering through legislative committees in the two weeks remaining before summer recess. By offering it as an amendment to the budget companion bill, state Rep. Marguerite Quinn, a Republican, hopes the governor could sign it into law with the budget.

Quinn said she initially planned to hold back her bill out of respect for Republican Gov. Tom Corbett, who wants to consider an impact fee after his Marcellus Shale Advisory Commission issues a report in late July.

But because the GOP-controlled Senate appears ready to move impact fee legislation before the June 30 budget deadline, Quinn said she wants to try to enact H.B. 1700.

She has bipartisan support for her plan to assess $50,000 per well in the first and second years, declining in subsequent years; 35 co-sponsors signed onto her bill, including House Appropriations Committee Chairman Bill Adolph, R-Delaware County.

The companion budget bill is the state fiscal code that sets tax rates, and without it, the state could not raise revenue or, ultimately, spend money.

Kevin Harley, Corbett's spokesman, said Tuesday that Corbett intends to wait for the advisory panel's report so that he knows the potential impact on communities. Corbett has said he wants any money from a fee to pay for community needs that arise from drilling.

Quinn's bill would allocate 50 percent for local governments, 5 percent to county conservation districts, 20 percent for the state Motor License Fund and 25 percent for state environmental spending.

She said her plan abides by Corbett's desire not to put impact fee money into the General Fund.

A recent statewide poll found that Pennsylvania voters said by a margin of 69-24 percent that gas extraction from deep wells should be taxed.

"I believe this is a common-sense, balanced approach to address the variety of issues our local governments and communities are experiencing," Quinn said. "It will address the infrastructure and the environment (and) yet not prevent the growth of this industry."

If lawmakers attach a shale tax amendment to the fiscal code, and Corbett holds to his timetable and criteria, it could set up a gubernatorial veto and jeopardize timely passage of the budget.

Copyright (c) 2011, The Pittsburgh Tribune-Review

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Impact Fee Proposed on Natural Gas Wells

- Impact Fee Proposed on Natural Gas Wells

Tuesday, June 14, 2011
Pittsburgh Post-Gazette
by Laura Olson

A state Senate measure to charge natural gas drillers a per-well impact fee will be getting some tweaks today, in an effort to move forward on the measure as lawmakers head into final budget talks.

One lawmaker says those are the beginning of a more comprehensive revamp to the drilling fee legislation, which is being negotiated by supporters in that chamber.

The Senate Environmental Resources and Energy Committee this morning will be taking up the impact fee bill from the chamber's President Pro Tem Joe Scarnati, R-Jefferson. An amendment from the panel's chairwoman would raise the initial amount of that fee, Although no fee would be assessed after the 10th year of production.

Under Mr. Scarnati's current bill, a $10,000 base fee would be charged, with that fee rising based on the price of natural gas and level of production. The senator's staff estimates that the average fee for a well in its first year of production would be between $25,000 and $30,000.

Of the revenue collected, 60 percent would go to local and county governments with drilling activity. The other 40 percent would go for environmental initiatives.

Changes from Sen. Mary Jo White, R-Venango, would start that fee at a flat $40,000, lowering it by $10,000 per year in the second, third and fourth years. A fee of $10,000 would be assessed from years four through 10.

Adam Pankake, the Senate panel's executive director, said that reflected the decrease they'd seen in the impacts on local communities as a well ages. As production decreases -- which occurs rapidly during the first few years that a shale well is producing -- the truck traffic and other strains on a municipality also shrink, he said.

Ms. White's proposed changes would also narrow how the 40 percent that goes toward environmental initiatives could be used. With the current measure, some funds could be used for open-space preservation and recreation trails. That option would be removed, Mr. Pankake said.

Another change would allow drillers a credit of up to 30 percent of their overall fee if they donate to a county housing trust fund or a nonprofit involved in affordable housing.

Drew Crompton, Mr. Scarnati's chief of staff, said the senator was pleased that his measure will probably be moving forward, but added that there were "some aspects that are going to need further conversation." Those include the proposed changes to how the environmental funds can be spent, he said.

Sen. Tim Solobay, D-Canonsburg, said other changes were under discussion for a broader overhaul of the fee proposal. Funding for continued training of emergency responders, as well as incentives for converting fleet vehicles to natural gas, could be included, he said.

Mr. Solobay said he supported the general aim of the impact fee plan to send the majority of funding to communities with drilling and reserve the remainder for environmental or infrastructure projects.

While he was optimistic that the measure "definitely" can be approved this month alongside the state budget, Mr. Scarnati's staff gave a more cautious forecast.

"It doesn't mean it gets done, but we are going to push the issue," Mr. Crompton said.

Copyright (c) 2011, Pittsburgh Post-Gazette

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Two Large Directional Drilling Sites Proposed in Greeley

- Two Large Directional Drilling Sites Proposed in Greeley

Tuesday, May 24, 2011
Greely Tribune, Colorado
by Sharon Dunn, Greeley Tribune, Colo.

Two new oil and gas well projects that would involve dozens of new wells are being proposed within Greeley's city limits now that directional drilling methods have basically been proven and commodity prices are cooperating.

These drilling projects come in a much larger scale than typical vertical drilling, with several wells proposed from one site.

"This is the changing face of the oil and gas industry, with more directional drilling," said Brandon Gossard, a planner with the city of Greeley. "We seem to be getting more applications for directional than otherwise.

"Only recently has that technology been reliable and cost effective to the point where a lot of bigger players have started to use the directional drilling platforms more and more often," Gossard said.

Greeley residents may remember letters from Mineral Resources they got earlier in the year, seeking permission to drill beneath their properties. Some of those letters relate to two projects under consideration this week:

• The Bestway Gravel Pit site off of 4th Street and 35th Avenue, where the company has proposed drilling 40 wells. Residents will get to sound off on the project at a neighborhood meeting Wednesday.
• The Island Grove site off of 11th Avenue across from Island Grove Regional Park, where the company has proposed drilling 22 wells. The Greeley Planning Commission is considering this project Tuesday. Neither project would need Greeley City Council approval, but ultimate planning commission decisions could be appealed to the council within 10 days of a decision.

Copyright (c) 2011, Greeley Tribune, Colo.

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