Magnum Hunter forms coalbed methane venture with CDX in New Mexico’s San Juan basin

Allen Baker

Petroleum News contributing writer

Magnum Hunter Resources has formed its second joint venture arrangement this month with a move to explore a huge number of acres in the San Juan basin of New Mexico for coalbed methane. The exploration area, which could cover as much as 6 million acres, will be drilled with CDX, a Dallas-based private company, Magnum Hunter said in late September.

Earlier in September, the Irving, Texas-based Magnum Hunter announced a joint venture with a Japanese company to explore offshore in the Gulf of Mexico’s outer continental shelf.

Magnum Hunter executives said the company and affiliates have exercised options on about 554,000 acres in northwestern New Mexico. And they’re in the process of exercising option rights on an additional 922,000 acres that covers area in the west-central part of the state, including the county that surrounds Albuquerque.

CDX, which formally includes CDX and CDX Frontier, both limited liability companies, will contribute 14,000 mineral acres and will perform all the drilling operations with its own rig fleet. CDX specializes in coalbed methane drilling.

Magnum Hunter will manage production.

The exploration will be concentrated in the upper and lower Menefee coals of the Mesaverde group, the company said.

Drilling began in early September for an initial 25-well program to provide stratigraphic and core testing.

Wells will be drilled to depths of up to 3,500 feet in the first phase, which is expected to cost approximately $3 million and end no later than February of next year.

Plans call for an additional $3 million investment for 25 more wells to be finished by next July, and then a $5 million third phase.

Production probably won’t begin until 2005, the company said.