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Magnum Hunter Targets Bankrupt Triad With 47,000 Marcellus Acres

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October 29, 2009

Gary Evan’s Magnum Hunter Resources Corp., Houston, (NYSE Amex: MHR) plans to acquire Appalachian Basin energy company and privately held, Reno, Ohio-based Triad Energy Corp., including its Marcellus shale prospective acreage, out of bankruptcy for approximately $81 million in cash, stock and debt assumption.

Magnum Hunter will pay up to $8 million in cash, assume or refinance approximately $58 million of senior debt owed to secured lenders, and issue some $15 million in Magnum Hunter shares.

Triad holds approximately 88,417 net mineral acres in Ohio, West Virginia and Kentucky, with approximately 75% held by production. Approximately 47,000 net acres (53% of the total net acres) overlay the Marcellus shale play. As of June 30 and supported by a third-party independent engineering report, Triad had total proved reserves of approximately 5.2 million barrels of oil equivalent (69% oil; 69% proved developed producing). Daily production from more than 2,000 wells is approximately 1,000 barrels of oil equivalent. The engineering report does not reflect any future potential that may exist from the drilling of horizontal wells in the Marcellus shale formation.

Triad's lease acreage position is concentrated and contiguous with existing Triad operations and production. Proved reserves and upside production potential is reflected in Triad's mature oil fields currently under primary and secondary development, conventional fields with additional development and behind-pipe potential and horizontal drilling of Triad's Marcellus shale acreage position.

Other assets involve oilfield service equipment including three air-drilling rigs, pole units, frac tanks, trailers, gang trucks and vacuum trucks; saltwater disposal facilities with a 1,000 barrel-per-day average disposal rate, and; the control of more than 55 miles of existing gas pipelines and pipeline right-of-ways known as the Eureka pipeline. Magnum Hunter expects to expand the transportation and processing business to third parties.

Magnum Hunter chairman Evans says, “The acquisition of these assets will provide Magnum Hunter a unique opportunity to establish a cost effective ownership position in the Appalachian Basin. Specifically, the emerging Marcellus shale play, which is one of the most active and most economically attractive hydrocarbon plays in the U.S. today, should provide our shareholders significant future growth potential. This transaction…demonstrates the type of acquisition we discussed when Ron Ormand and I first joined Magnum Hunter in late May.”

He adds, “When you combine Triad's low-decline rate and long-life producing assets—the reserves-to-production ratio approximates 25 years—with its stable and predictable production levels and cash flows, and the company's upside potential from behind-pipe reserves, numerous undrilled locations, waterflood enhancement opportunities and, most exciting of all, Triad's untapped Marcellus shale horizontal development potential, this easily becomes a company changing event for Magnum Hunter."

RBC Richardson Barr and Barrier Advisors are advisors to Triad. The closing, subject to final approval of the federal bankruptcy court, is expected in late 2009 or early 2010.

Pritchard Capital Partners analyst Stephen Berman says that as a result of the recent acquisition of Sharon Resources Inc. and the proposed acquisition of Triad, Magnum Hunter is now positioned in three of the most prolific areas of the country: the Marcellus shale, the Eagle Ford shale with 7,242 acres in Fayette and Lee counties, and the North Dakota Williston/Bakken. "Through acquisition, the company has been changing the stripes of the old Petro Resources by increasing the percentage of operated assets and increasing exposure to resource plays and unconventional areas with long reserve lives. The company’s announcement earlier this week of a new three-year, $150-million senior secured revolving credit facility positions MHR to make further accretive acquisitions."

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