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Magnum Hunter Resources Corporation has reported a 23% increase in the quantity of the Company's estimated total proved oil and natural gas reserves at December 31, 2013, as compared to such reserves at December 31, 2012 (as adjusted for the Company's Eagle Ford divestiture described below).
The present value of estimated future cash flows, before income taxes, of the Company's estimated total proved reserves as of year-end 2013, discounted at 10%, also increased 22% or $168.7 million to $922.1 million, as compared to the PV-10 of such reserves at year-end 2012 (as adjusted for such divestiture). Please note the Company's December 31, 2012 total proved reserves decreased from 73.1 million barrels of oil equivalent to 61.6 MMBoe as a result of the Company's Eagle Ford divestiture that was completed on April 24, 2013. The Company divested its ownership interests in approximately 19,000 net acres located in Gonzales and Lavaca Counties of South Texas in April 2013 for approximately $401 million (before purchase price adjustments).
Magnum Hunter's total proved reserves increased by 14.3 MMBoe to 75.9 MMBoe (46% crude oil and NGLs; 52% proved developed producing) at December 31, 2013, as compared to 61.6 MMBoe (57% crude oil and NGLs; 56% proved developed producing) at December 31, 2012. Proved developed producing reserves increased 16% to 39.6 MMBoe as of December 31, 2013, predominately as a result of the Company's continued execution of its development drilling program in the Appalachian Basin. Proved undeveloped reserves increased 23% to 27.4 MMBoe primarily due to the execution and delineation of the Company's existing lease acreage position in the Marcellus Shale. The Company's reserve life (R/P ratio) of its proved reserves based on current production is approximately 11.9 years.
As of December 31, 2013, there were proved reserves attributable to only one Utica Shale well included in the new reserve report. The Company expects to significantly increase reserves in the Utica Shale, where it presently owns over 97,000 net leasehold acres, during 2014 as a result of "pad" drilling and delineation of its lease acreage position in this region. The Appalachian Basin accounted for 70% of Magnum Hunter's proved reserve volumes at December 31, 2013, the Williston Basin accounted for 28% and other legacy assets, including the Company's remaining assets in South Texas, accounted for the remaining 2%.
The PV-10 of the Company's proved reserves at December 31, 2013 increased by $168.7 million or 22% to $922.1 million from $753.4 million at December 31, 2012 (see "Non-GAAP Financial Measures and Reconciliations" below). Under SEC guidelines, the commodity prices used in the December 31, 2013 and December 31, 2012 PV-10 estimates were based on the 12-month unweighted arithmetic average of the first day of the month prices for the period January 1, 2013 through December 31, 2013, and for the period January 1, 2012 through December 31, 2012, respectively, adjusted by lease for transportation fees and regional price differentials. For crude oil and NGL volumes, the average West Texas Intermediate posted price of $96.78 per barrel used to calculate PV-10 at December 31, 2013, was up 2% from the average price of $94.71 per barrel used to calculate PV-10 at December 31, 2012. For natural gas volumes, the average price of the Henry Hub spot price of $3.67 per million British thermal units ("MMBTU") used to calculate PV-10 at December 31, 2013 was up 33% from the average price of $2.75 per MMBTU used to calculate PV-10 at December 31, 2012. All prices were held constant throughout the estimated economic life of the properties.
The estimates of Magnum Hunter's total proved reserves as of December 31, 2013 were prepared by the Company's independent engineering consultant, Cawley Gillespie & Associates, Inc., and include Marcellus, Utica and Williston Basin/Bakken/Sanish Shales reserves.
Mr. Gary C. Evans, Chairman and Chief Executive Officer of Magnum Hunter, commented, "This past year's growth in proved reserves was primarily attributable to our success in the Marcellus Shale Play of West Virginia and Southeastern Ohio. We were successful at replacing over 100% of the reserves lost in 2013 due to asset divestitures which included our Eagle Ford Division ($401 million). We had three new Marcellus wells that have been estimated to have over 10.5 Bcfe of proved reserves per well and one of those wells was estimated to have 11.7 Bcfe of proved reserves. Approximately 55% of our Marcellus wells exceed the average estimated cumulative proved reserves of 7.8 Bcfe each.
"Every year since initiating operations in the Marcellus Shale Play back in 2010, we have been successful at increasing the ultimate recoveries on new drills. This is a testimony of not only the quality of our lease acreage position, but also management's ability to continue improving upon our well completion methods. A significant point to note is that none of the proved reserves announced today include the Utica Shale Play where we hold close to 100,000 net leasehold acres with the exception of one well that had only a partial completion due to downhole issues. Therefore, with our greatly expanded Appalachian drilling budget, we are confident in our ability to continue to grow our proved reserves in both of these two exciting resources plays in a significant way during 2014."
