Penn Virginia & Magnum Hunter Eagle Ford Deal Worth $401 Million

Penn Virginia Eagle Ford Map
Penn Virginia Eagle Ford Map

Penn Virginia (PVA) has reached an agreement with Magnum Hunter Resources to acquire the company's Eagle Ford properties in Gonzales and Lavaca counties for $401 million. Magnum Hunter will retain 7,000 net acres in Atascosa, Fayette, and Lee counties.

The deal consist of approximately 40,600 gross (19,000 net) acres, with 46 gross (22.1 net) wells producing approximately 3,000 boe/d net in March of 2013. Seven wells are waiting to be completed and four wells are in some stage of drilling. Proved reserves of 12 million boe (37% PDP) were attributed to the assets at year-end 2012.

H. Baird Whitehead , President and Chief Executive Officer stated, “This is a transformational acquisition which will add significantly to our leasehold and drilling inventory in the Eagle Ford Shale play and is highly complementary to our existing operating areas where we and MHR have had very successful drilling results.

If we assume PVA paid an average of $60,000 per flowing boe/d, that accounts for $180 million of the acquisition price. That leaves $221 million for the 19,000 net acres or a little less than $12,000/acre. That's a rough estimate.

Penn Virginia now has 83,000 gross (54,000 net) contiguous acres in the area with an inventory of 640 gross (420 net) drilling locations. PVA now has 117 gross (82 net) wells producing an average of 10,900 boe/d. Drilling for the year in the Eagle Ford will now increase from 38 (28.8 net) wells to 62 (39.3 net) wells. Penn Virginia's capital budget will increase by $72-82 million as a result.

Magnum Hunter's Pearsall Shale exploration well with Marathon in Atascosa County will not be affected by the deal.