IRVING, Texas, Sept. 22 /PRNewswire-FirstCall/ -- Magnum Hunter Resources, Inc. (NYSE: MHR) announced today that it has established a new core area for the Company in the San Juan Basin of New Mexico concentrating on the Upper and Lower Menefee coals of the Mesaverde Group. In an effort to immediately explore this substantial acreage position, Magnum Hunter has formed a joint venture arrangement with CDX, LLC and CDX Frontier, LLC (hereinafter collectively referred as "CDX Gas") to participate in the exploration and development of this region of New Mexico covering an approximate 6,000,000 acre area of mutual interest ("AMI"). CDX is a private Dallas-based exploration company specializing in state-of-the-art coalbed methane drilling and production technologies and is recognized as an industry leader in developing unconventional resources. Its world record winning Z-Pinnate(TM) Horizontal Drilling and Completion System has been recognized by environmentalists and regulatory agencies as having significant advantages in developing natural gas reserves with minimal surface and environmental impact. CDX's subsidiary, CDX-DART Drilling & Technology, LLC ("CDDT"), will perform all drilling operations with its fleet of purpose-built rigs. Magnum Hunter will manage all production operations. Magnum Hunter and its affiliates have recently exercised certain options on mineral leasehold acreage located in McKinley, Sandoval and San Juan Counties, New Mexico covering approximately 554,000 acres that have been contributed to this joint venture. Additionally, Magnum Hunter is in the process of exercising certain exclusive option rights on an incremental 922,000 mineral acres located in Bernillo, Catron, Cibola and Socorro Counties, New Mexico. CDX's contribution to the joint venture is approximately 14,000 mineral acres more commonly referred to as the Southeast Cabrito Project, Rio Puerco Project and Zed Project. Also, the joint venture has recently acquired new mineral leases covering approximately 8,000 acres from the State of New Mexico. The joint venture is structured as a three phase drilling program which was initiated last week. Phase I of the exploration program calls for the drilling of 25 wells at depths up to 3,500 feet which will be a combination of stratagraphic tests and core tests. CDX and its affiliate will manage the drilling phase of the drilling program and total estimated cost of Phase I is approximately $3 million. It is anticipated that all work will be completed under Phase I of the program on or before February 15, 2004. Phase II of the program will be comprised of drilling an additional 25 wells (15 stratagraphic tests and 10 core tests). It is anticipated that the Phase II program will be completed on or before July 1, 2004. The total estimated cost of the Phase II program is $3 million. Phase III of the program will consist of drilling several pilot projects both vertical and horizontal. The estimated cost of the Phase III program is approximately $5 million. In addition to the Southern San Juan coalbed methane potential in the Cretaceous Menefee formation, a number of conventional shallow oil and gas fields exist in the sands within the Menefee formation. These fields, which range in depth from 300 to 2,200 feet, have produced over one million barrels of oil in McKinley County alone. On the southern portion of the Chaco shelf, along the south flank of the San Juan Basin, the Hospah sands developed within the Cretaceous Mancos shale interval, have produced over 21 million barrels of oil in six sections from depths of 1,100 to 2,300 feet. The Hospah field was first discovered in 1927 and has produced approximately seven million barrels of oil when it was offset in the mid 1960s. The South Hospah Field was subsequently discovered with this offset. This field has produced in excess of fourteen million barrels since that time. Magnum Hunter own the mineral leases on approximately 75% of all of the acreage within an 18-mile radius of these fields. Additionally, oil and gas potential is present throughout this substantial acreage position within the Cretaceous Dakota sandstone and in the Jurassic Entrada sandstone formations. Commenting on this new core area established in the San Juan Basin, Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "This is one of the most exciting projects that I have ever been involved in my over 18 year tenure here at Magnum Hunter. The reserve potential of this unexplored region significantly exceeds our Company's current proved reserve base. By attracting a company such as CDX Gas as our drilling partner who has brought significant knowledge and years of coalbed methane expertise, including their revolutionary patented technology, Magnum Hunter is able to immediately exploit this new asset with minimal capital outlay. Some advantages of CDX's 'Z-Pinnate' drilling technology includes recovery of up to 85% of gas in place within 36 months at flow rates ranging from 1.2 MMcf per day to 2.5 MMcf per day from low permeability reservoirs. A well can cover up to 1200 acres from a single location, providing for minimal environmental impact." Mr. Doug Wight, Vice President of Corporate Development for CDX Gas stated, "We're thrilled about the combined synergy of strengths of Magnum Hunter and CDX Gas to explore and unlock the natural gas resources in New Mexico while simultaneously maintaining a reputation as an environmental guardian of all natural resources. The Z-Pinnate(TM) system enables CDX to recover methane gas from unconventional reservoirs significantly faster and in a more environmentally friendly way than traditional technologies. With today's increasing demand for natural gas, we are exploring new opportunities to apply our latest drilling technologies in developing gas from formations that in the past were uneconomic to drill with traditional technologies." When asked to respond, Bill Richardson, Governor of the State of New Mexico commented, "Our State and nation are in dire need of new sources of natural gas from our domestic homeland to meet our future energy requirements. The State of New Mexico has a rich resource base of natural gas, especially in the San Juan Basin. This is the type of project that brings together new technology with previously untapped mineral acreage that will benefit all concerned. The State of New Mexico supports these type of projects which will not only minimize surface damage, but will significantly enhance our State's tax revenue base." Formed in 1991, Dallas-based CDX is a North American land-based natural gas drilling and exploration company. CDX has patented the Z-Pinnate(TM) Horizontal Drilling and Completion System that can tap rich, low-permeability coal and shale gas reservoirs, approaching recovery rates comparable to offshore well production rates. CDX and affiliated companies provide turnkey production capabilities with their own coring rigs, drilling rig fleet, directional tools and services, laboratories and full spectrum operating teams. It operates in locations throughout North America. Magnum Hunter Resources, Inc. is one of the nation's fastest growing independent exploration and development companies engaged in three principal activities: 1) the exploration, development and production of crude oil, condensate and natural gas; 2) the gathering, transmission and marketing of natural gas; and 3) the managing and operating of producing oil and natural gas properties for interest owners. The information in this release includes certain forward-looking statements that are based on assumptions that in the future may prove not to have been accurate. Those statements, and Magnum Hunter Resources, Inc.'s business and prospects, are subject to a number of risks, including volatility of oil and gas prices, the need to develop and replace reserves, the substantial capital expenditures required to fund its operations, environmental risks, drilling and operating risks, risks related to exploration and development drilling, uncertainties about estimates of reserves, competition, government regulation, and the ability of the company to implement its business strategy. These and other risks are described in the company's reports that are available from the SEC. FOR FURTHER INFORMATION CONTACT: M. BRADLEY DAVIS SENIOR VICE PRESIDENT-CAPITAL MARKETS (972) 401-0752
SOURCE Magnum Hunter Resources, Inc.