Magnum Hunter Resources Raises $40.8 Million From Utica Property Sale

Magnum Hunter Resources (NASDAQ: MHR) has announced an agreement to sell non-core, undeveloped Utica shale acreage in West Virginia for $40.8 million. The sale of approximately 5,210 unproven acres is expected to close on May 28.

Sale 'Made Sense’

According to Magnum Hunter CEO Gary Evans, the sale of the property made financial sense for the company. “The undeveloped properties to be sold pursuant to the agreement announced today are deemed non-core to Magnum Hunter and were not in our long-term drilling plan for this immediate area. Additionally, with lease expirations on the horizon on a large portion of this acreage, it made sense to sell these properties now to an industry competitor that already owns adjacent leases,” Evans explained in a press release.

Drop In The Bucket

The sale of the Tyler County, West Virginia property barely made a dent in Magnum Hunter’s approximately 210,000 acres of Marcellus and Utica shale property in eastern Ohio and West Virginia.

Although the acreage of the disposed land may be relatively small, Magnum Hunter has had good luck with its previous drilling in Tyler County. In 2014, one of the company’s wells on its Steve Winland pad recorded the highest natural gas production in the entire Utica shale.

Strapped For Cash

The asset sale comes at a critical time for Magnum Hunter. On April 29, the company filed an 8-K document explaining that it had until May 29, 2015 to raise $65 million in cash via asset sales, joint venture and/or share issuance.

The $40.8 million in proceeds from the Tyler County sale accounts for nearly two-thirds of the required fund-raising, as the deal will close one day before the May 29 deadline. Magnum Hunter had said earlier this month that it eventually intends to sell $450 million worth of Ohio property to provide a longer-term solution to the company’s liquidity situation.

Shares of Magnum Hunter are trading up slightly following the news but have surged more than 13.1 percent in the past five trading sessions.

Disclosure: the author owns shares of Magnum Hunter Resources.