By the OGJ Online Staff
HOUSTON, Dec. 18 -- Magnum Hunter Resources Inc. and Prize Energy Corp. Tuesday said they would merge into a $1.2 billion independent oil and gas company during the first quarter.
The company will continue to be named Magnum Hunter Resources and will remain in Irving, Tex.
Gary Evans, chairman, president and CEO of Magnum Hunter said, "The combination of these two Dallas-based companies creates an organization that is stronger and in better position to compete than either would be independently."
He will stay president and CEO of the merged company.
If stockholders approve the merger, Prize shareholders will get $24/share payable in 2.5 shares of Magnum Hunter common for each share of Prize Energy, plus a cash component that will be determined based on a sliding scale with a minimum of 25¢/share. The merger will be nontaxable to the shareholders. Magnum Hunter shareholders will own 51% of the combined company.
The merged company will have a debt-to-capitalization ratio lower than 60% and improved financial coverage ratios. Magnum Hunter and Prize Energy said the merger would result in cost savings of $8-10 million/year.
On a combined basis, the companies had reserves of 1 tcf of gas as of last Dec. 31. For the 9 months ended Sept. 30, their production was 232 MMcfd of gas equivalent. The reserves-to-production ratio is more than 12 years.
Magnum Hunter and Prize Energy both have core operating areas of the Permian basin of West Texas and southeastern New Mexico, the Midcontinent region of western Oklahoma and the Texas Panhandle, and the onshore Gulf Coast area of South Texas and Louisiana
The two firms have a 5-year drilling inventory of 1,000 onshore locations and have undrilled blocks in the shallow waters of the Gulf of Mexico.
They will have hedged 2002 gas production of 103 MMcfd at a NYMEX weighted average floor price of $3.44/Mcf and hedged oil production of 5,750 b/d at $23.23/bbl.