Magnum Hunter Resources has continued its strategy of bringing in partners to share risk in its exploration of the Utica shale play by signing a new joint venture with privately held EM Energy Ohio to team up on a tract in southern Ohio.
Under the terms of the deal, EM will pool together more than 1000 acres they collectively hold in Washington County in the southern portion of the stacked Utica-Marcellus play.
The work plan includes development drilling at the Merlin pad, where Magnum Hunter has already spud a Utica shale well as part of the agreement, as well as plans to drill one Utica and one Marcellus well from the Haynes pad later this year.
The deal marks the third time Magnum Hunter has teamed up in the Utica.
The Houston-based independent has previously worked with Stone Energy in Wetzel County, West Virginia, and Eclipse Resources in Monroe County, Ohio.
"By forming these joint units, we more efficiently exploit the leasehold, which allows for longer laterals to be drilled in both the Marcellus and Utica formations," chief executive Gary Evans said. "It also reduces overall costs by strategically locating the drilling pad in a manner that is most efficient for development due to the treacherous terrain typical in this area."
Evans said the company will continue to look for similar deals in the future.
"We hope to form additional joint development units as we further exploit this resource rich area where we typically have two high quality formations stacked on top of one another," he said.
Analysts at investment bank Capital One Southcoast called the agreement a "slight positive" for Magnum Hunter.
"Although this joint venture only covers a small acreage position, we like the agreement since it should allow for more efficient resource development and expect Magnum Hunter will look to enter similar Utica-Marcellus agreements," analyst Richard Tullis said in a note to clients.