Penn Virginia Corp. has offered $400 million to Magnum Hunter Resources Corp. to acquire the company’s producing properties and undeveloped leasehold interests in the Eagle Ford Shale play in Texas.

Under the deal, Penn Virginia will acquire about 19,000 net mineral acres in Gonzales and Lavaca Counties, Texas which are located adjacent to the company’s current position in both counties. As a result, Penn will own roughly 83,000 gross acres of the Eagle Ford Shale and will increase their drilling inventory by 345 locations, for a total of 640 drilling locations, the company noted in a press release.

“The announcement of the sale of this property today is ‘bitter sweet’ for our management and board,” commented Gary C. Evans, chairman of the board and CEO of Magnum Hunter Resources. “Our company’s entry into the Eagle Ford Shale initially began when we acquired Sharon Resources, Inc. back in September 2009. It has always been our belief that as the various shale plays mature, building scale is extremely important for achieving long term economic value and that is what is being accomplished today. We wish Penn Virginia success in this transaction.”

The assets include 46 producing wells which will increase its count to 117 wells. Seven wells are in the process of being completed or awaiting completion and four wells are being drilled on the acquired acreage. The company stated it plans to drill up to 62 Eagle Ford Shale wells during 2013.

The total consideration for this transaction will be paid approximately 90 percent or $361 million in cash and, at the option of Penn Virginia, the remaining 10 percent or $40 million either in cash or Penn Virginia shares valued at $4 per share, said Magnum Hunter in a released statement.

Upon closing, Magnum Hunter will use the proceeds from the transaction to reduce debt. Penn Virginia expects for the transaction to close in early to mid-May 2013, subject to regulatory approval.

“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,” said H. Baird Whitehead, president and CEO of Penn Virginia, in a release statement.

Estimated net oil and gas production for the acquired assets was roughly 3,200 barrels of oil equivalent per day in February 2013, Penn Virginia stated in a press release. Additionally, based on a third-party reserve engineering review of the acquired assets, proved reserves as of year-end were about 12 million barrels of oil equivalent, 96 percent of which were crude oil and natural gas liquids and 37 percent of which were proved developed.

Penn Virginia is engaged primarily in the development, exploration and production of oil and natural gas in onshore regions in Texas, Oklahoma, Mississippi and Pennsylvania.

Sourced: Rigzone April 3, 2013