FORM
10-Q




SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended September 30, 2009





-OR-





 ̈
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from _______ to _______




Commission
file number 001-32997










MAGNUM
HUNTER RESOURCES CORPORATION


(Name of
registrant as specified in its charter)





Delaware
            86-0879278(State
      or other jurisdiction of
              incorporation
      or organization)
            (IRS
      Employer
              Identification
      No.)





777
Post Oak Boulevard, Suite 910, Houston, Texas 77056


(Address
of principal executive offices)





(832)
369-6986


(Issuer’s
telephone number)





Indicate
by check mark  whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
twelve months, and (2) has been subject to such filing requirements for the
past 90 days. Yes x
No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes  ̈ No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company (as
defined in Rule 12b-2 of the Act):





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x(Do
      not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ No x





As of
November16, 2009 there were 52,622,860 shares of the registrant’s common stock
($.01 par value) outstanding.










MAGNUM
HUNTER RESOURCES CORPORATION


(FORMERLY
PETRO RESOURCES CORPORATION)





QUARTERLY
REPORT ON FORM 10-Q


FOR THE
PERIOD ENDED SEPTEMBER 30, 2009





TABLE OF
CONTENTS





PagePART
      I. FINANCIAL INFORMATIONItem 1.
      Financial Statements (Unaudited):
            1Consolidated
      Balance Sheets as of September 30, 2009 and December 31,
    2008
            1Consolidated
      Statements of Operations for the Three Months and Nine Months Ended
      September 30, 2009 and 2008
            2Consolidated
      Statements of Shareholders’ Equity for the Nine Months Ended September 30,
      2009
            3Consolidated
      Statements of Cash Flows for the Nine Months Ended September 30, 2009 and
      2008
            4Notes
      to Consolidated Financial Statements
            5Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations
            14Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
            22Item 4T.
      Controls and Procedures
            22Part
      II. OTHER INFORMATION
            23Item 6.
      Exhibits
            23SIGNATURES
            24










MAGNUM
HUNTER RESOURCES CORPORATION


(FORMERLY
PETRO RESOURCES CORPORATION)


CONSOLIDATED
BALANCE SHEETS


(Unaudited)





September
      30,
            
            
            December
      31,2009
            
            
            2008AssetsCurrent
      assetsCash
      and cash equivalents
            
            $
            2,332,127
            
            
            $
            6,120,402Accounts
      receivable
            
            
            1,543,595
            
            
            
            1,038,973Prepaids
            
            
            154,309
            
            
            
            75,406Derivative
      assets
            
            
            1,765,759
            
            
            
            2,944,997Total
      current assets
            
            
            5,795,790
            
            
            
            10,179,778Property
      and equipmentOil
      and natural gas properties, successful efforts accountingUnproved
            
            
            18,594,339
            
            
            
            18,562,932Proved
      properties, net
            
            
            35,492,793
            
            
            
            27,264,790Furniture
      and fixtures, net
            
            
            130,841
            
            
            
            110,499Total
      property and equipment
            
            
            54,217,973
            
            
            
            45,938,221Other
      assetsDerivative
      assets
            
            
            2,066,956
            
            
            
            4,338,832Deferred
      financing costs, net of amortization of $439,336 and $129,200
      respectively
            
            
            887,644
            
            
            
            1,197,780Deposit
            
            
            11,007
            
            
            
            10,257Total
      other assets
            
            
            2,965,607
            
            
            
            5,546,869Total
      Assets
            
            $
            62,979,370
            
            
            $
            61,664,868Liabilities
      and Shareholders' EquityCurrent
      liabilitiesAccounts
      payable
            
            $
            1,321,347
            
            
            $
            2,617,034Accrued
      liabilities
            
            
            169,338
            
            
            
            106,592Revenue
      payable
            
            
            212,911
            
            
            
            -Derivative
      liability
            
            
            62,595
            
            
            
            -Payable
      on sale of partnership
            
            
            640,695
            
            
            
            754,255Note
      payable
            
            
            109,741
            
            
            
            19,527Total
      current liabilities
            
            
            2,516,627
            
            
            
            3,497,408Revolving
      credit borrowings
            
            
            12,000,000
            
            
            
            6,500,000Term
      loan
            
            
            15,000,000
            
            
            
            15,000,000Asset
      retirement obligation
            
            
            1,884,826
            
            
            
            1,589,197Total
      liabilities
            
            
            31,401,453
            
            
            
            26,586,605Shareholders'
      equityPreferred
      stock, $0.01 par value; 10,000,000 shares authorized,none issued
      and outstanding.
            
            
            -
            
            
            
            -Common
      stock, $0.01 par value; 100,000,000 shares authorized,43,140,096
      and 36,768,172 shares issued and outstanding as of September 30, 2009 and
      December 31, 2008 respectively
            
            
            431,401
            
            
            
            367,682Additional
      paid in capital
            
            
            55,694,494
            
            
            
            51,311,502Accumulated
      deficit
            
            
            (25,802,911
            )
            
            
            (17,985,830
            )Total Magnum
      Hunter Resources Corporation shareholders' equity
            
            
            30,322,984
            
            
            
            33,693,354Non-controlling
      interest
            
            
            1,254,933
            
            
            
            1,384,909Total
      Equity
            
            
            31,577,917
            
            
            
            35,078,263Total
      Liabilities and Shareholders' Equity
            
            $
            62,979,370
            
            
            $
            61,664,868





The
accompanying notes are an integral part of these unaudited consolidated
financial statements


1


MAGNUM
HUNTER RESOURCES CORPORATION


(FORMERLY
PETRO RESOURCES CORPORATION)


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008RevenueOil
      and gas sales
            
            $
            2,320,514
            
            
            $
            4,782,933
            
            
            $
            6,566,441
            
            
            $
            12,209,376Gain
      on sale of assets
            
            
            -
            
            
            
            1,181,963
            
            
            
            -
            
            
            
            1,181,963Other
      income
            
            
            -
            
            
            
            -
            
            
            
            200,000
            
            
            
            100,000Total
      revenue
            
            
            2,320,514
            
            
            
            5,964,896
            
            
            
            6,766,441
            
            
            
            13,491,339ExpensesLease
      operating expenses
            
            
            1,288,850
            
            
            
            1,492,163
            
            
            
            3,806,617
            
            
            
            4,061,269Exploration
            
            
            278,689
            
            
            
            2,179,388
            
            
            
            392,365
            
            
            
            2,789,552Depreciation,
      depletion and accretion
            
            
            993,380
            
            
            
            718,513
            
            
            
            3,100,242
            
            
            
            1,855,706General
      and administrative
            
            
            2,329,401
            
            
            
            817,811
            
            
            
            4,521,076
            
            
            
            3,005,583Total
      expenses
            
            
            4,890,320
            
            
            
            5,207,875
            
            
            
            11,820,300
            
            
            
            11,712,110Income
      (loss) from operations
            
            
            (2,569,806
            )
            
            
            757,021
            
            
            
            (5,053,859
            )
            
            
            1,779,229Other
      income and (expense)Interest
      income
            
            
            72
            
            
            
            40,641
            
            
            
            924
            
            
            
            179,643Interest
      expense
            
            
            (688,469
            )
            
            
            (1,066,477
            )
            
            
            (1,866,655
            )
            
            
            (2,172,257
            )Loss
      on debt extinguishment
            
            
            -
            
            
            
            (2,790,829
            )
            
            
            -
            
            
            
            (2,790,829
            )Gain
      (loss) on derivative contracts
            
            
            190,637
            
            
            
            2,477,405
            
            
            
            (1,027,467
            )
            
            
            (986,245
            )Net
      loss
            
            
            (3,067,566
            )
            
            
            (582,239
            )
            
            
            (7,947,057
            )
            
            
            (3,990,459
            )Less:
      Net loss attributable to non-controlling interest
            
            
            15,344
            
            
            
            322,306
            
            
            
            129,976
            
            
            
            672,296Net
      loss attributable to Magnum Hunter Resources Corporation
            
            
            (3,052,222
            )
            
            
            (259,933
            )
            
            
            (7,817,081
            )
            
            
            (3,318,163
            )Dividend
      on Series A Convertible Preferred
            
            
            -
            
            
            
            (275,605
            )
            
            
            -
            
            
            
            (734,406
            )Net
      loss attributable to common stockholders
            
            $
            (3,052,222
            )
            
            $
            (535,538
            )
            
            $
            (7,817,081
            )
            
            $
            (4,052,569
            )Loss
      per common shareBasic
      and diluted
            
            $
            (0.08
            )
            
            $
            (0.01
            )
            
            $
            (0.21
            )
            
            $
            (0.11
            )Weighted
      average number of common shares outstandingBasic
      and diluted
            
            
            37,012,912
            
            
            
            36,738,145
            
            
            
            36,863,881
            
            
            
            36,703,179








The
accompanying notes are an integral part of these unaudited consolidated
financial statements


2





MAGNUM
HUNTER RESOURCES CORPORATION


(FORMERLY
PETRO RESOURCES CORPORATION)


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY


(Unaudited)





Common
      Stock
            
            
            Additional
            
            
            
            
            
            
            
            
            TotalNumber
            
            
            
            
            
            Paid-in
            
            
            Accumulated
            
            
            Non-controlling
            
            
            Shareholders'of
      Shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            Interest
            
            
            EquityBalance,
      December 31, 2008
            
            
            36,768,172
            
            
            $
            367,682
            
            
            $
            51,311,502
            
            
            $
            (17,985,830
            )
            
            $
            1,384,909
            
            
            $
            35,078,263Restricted
      stock issued to employees and directors
            
            
            4,077,450
            
            
            
            40,775
            
            
            
            644,124
            
            
            
            -
            
            
            
            -
            
            
            
            684,899Stock
      options to employees and directors
            
            
            -
            
            
            
            -
            
            
            
            1,077,277
            
            
            
            -
            
            
            
            -
            
            
            
            1,077,277Shares
      issued for acquisition of Sharon Resources, Inc.
            
            
            2,294,474
            
            
            
            22,944
            
            
            
            2,661,591
            
            
            
            -
            
            
            
            -
            
            
            
            2,684,535Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (7,817,081
            )
            
            
            (129,976
            )
            
            
            (7,947,057
            )Balance,
      September 30, 2009
            
            
            43,140,096
            
            
            $
            431,401
            
            
            $
            55,694,494
            
            
            $
            (25,802,911
            )
            
            $
            1,254,933
            
            
            $
            31,577,917











The
accompanying notes are an integral part of these unaudited consolidated
financial statements








3




MAGNUM
HUNTER RESOURCES CORPORATION


(FORMERLY
PETRO RESOURCES CORPORATION)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Nine
      Months EndedSeptember
      30,2009
            
            
            2008Cash
      flows from operating activitiesNet
      loss
            
            $
            (7,947,057
            )
            
            $
            (3,990,459
            )Adjustments
      to reconcile net loss to net cashprovided by operating
      activities:Depletion,
      depreciation, and accretion
            
            
            3,100,242
            
            
            
            1,855,706Amortization
      of deferred financing costs included in interest expense
            
            
            310,136
            
            
            
            1,562,989Dry
      hole costs
            
            
            282,056
            
            
            
            2,600,817Noncash
      stock compensation
            
            
            1,762,176
            
            
            
            1,220,552Gain
      on sale of assets
            
            
            -
            
            
            
            (1,181,963
            )Loss
      on extinguishment of debt
            
            
            -
            
            
            
            2,790,829Unrealized
      (gain) loss on derivative contracts
            
            
            3,513,709
            
            
            
            (851,577
            )Changes
      in operating assets and liabilities:Accounts
      receivable and accrued revenue
            
            
            (216,497
            )
            
            
            (688,732
            )Prepaid
      expenses
            
            
            (76,509
            )
            
            
            (113,978
            )Accounts
      payable
            
            
            249,403
            
            
            
            350,482Revenue
      payable
            
            
            212,911
            
            
            
            -Accrued
      expenses
            
            
            62,746
            
            
            
            54,218Net
      cash provided by operating activities
            
            
            1,253,316
            
            
            
            3,608,884Cash
      flows from investing activitiesCapital
      expenditures
            
            
            (10,753,268
            )
            
            
            (12,292,702
            )Cash
      received in purchase of Sharon Resources, Inc.
            
            
            235,023
            
            
            
            -Proceeds
      from sale of assets
            
            
            -
            
            
            
            7,828,962Purchase
      of floor
            
            
            -
            
            
            
            (363,175
            )Investment
      in partnership
            
            
            -
            
            
            
            (1,999,800
            )Net
      cash used in investing activities
            
            
            (10,518,245
            )
            
            
            (6,826,715
            )Cash
      flows from financing activitiesFinancing
      costs
            
            
            -
            
            
            
            (1,312,599
            )Payments
      for debt refinancing
            
            
            -
            
            
            
            (144,565
            )Redemption
      of preferred stock
            
            
            -
            
            
            
            (7,966,735
            )Proceeds
      from revolving credit borrowings
            
            
            5,500,000
            
            
            
            1,500,000Proceeds
      from term loan
            
            
            -
            
            
            
            15,000,000Proceeds
      from loan
            
            
            217,336
            
            
            
            4,225,348Principal
      payment on loan
            
            
            (127,122
            )
            
            
            (18,467,306
            )Payment
      on payable on sale of partnership
            
            
            (113,560
            )
            
            
            -Net
      cash provided by (used in) financing activities
            
            
            5,476,654
            
            
            
            (7,165,857
            )Net
      decrease in cash and cash equivalents
            
            
            (3,788,275
            )
            
            
            (10,383,688
            )Cash
      and cash equivalents, beginning of period
            
            
            6,120,402
            
            
            
            15,399,547Cash
      and cash equivalents, end of period
            
            $
            2,332,127
            
            
            $
            5,015,859Supplemental
      disclosure of cash flow informationCash
      paid for interest
            
            $
            1,556,519
            
            
            $
            1,177,075Cash
      paid for federal income taxes
            
            
            -
            
            
            
            -Non-cash
      transactionsCapitalized
      interest in oil and gas properties
            
            $
            -
            
            
            $
            1,149,181Property
      and equipment included in accounts payable
            
            $
            -
            
            
            $
            986,347Stock
      issued for acquisition of Sharon Resources, Inc.
            
            $
            2,684,535
            
            
            $
            -





The
accompanying notes are an integral part of these unaudited consolidated
financial statements


4





MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
1 - Basis of Presentation





The
accompanying unaudited interim financial statements of Magnum Hunter Resources
Corporation (the “Company”) have been prepared in accordance with accounting
principles generally accepted in the United States of America and
the rules of the Securities and Exchange Commission, and should be
read in conjunction with the audited financial statements and notes thereto
contained in the Company’s annual report on Form 10-K for the year ended
December 31, 2008.  In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the financial position and the results of operations for the interim periods
presented have been reflected herein.  The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year.  Notes to the consolidated financial statements which
would substantially duplicate the disclosure contained in the audited
consolidated financial statements as reported in the 2008 annual report on Form
10-K have been omitted.





On July
14, 2009,  the Company formed a new subsidiary to purchase Magnum
Hunter Resources, LP and the new subsidiary was  merged into Petro
Resources Corporation in order to effect a name change from "Petro Resources
Corporation" to ''Magnum Hunter Resources Corporation".





Certain
prior period balances have been reclassified to conform to the current period
presentation.





Income
or Loss Per Share





Basic
income or loss per common share is net income available to common stockholders
divided by the weighted average of common shares outstanding during the
period.  Diluted income or loss per common share is calculated in the
same manner, but also considers the impact to net income and common shares
outstanding for the potential dilution from in-the-money stock options and
warrants, and convertible debentures and preferred stock.





We have
issued potentially dilutive instruments in the form of our restricted common
stock granted and not yet issued, common stock warrants, and common stock
options.  The total number of potentially dilutive securities at
September 30, 2009 was 17,284,143.  There were 8,488,962 dilutive
securities outstanding at September 30, 2008.  We did not include the
potentially dilutive securities in our calculation of diluted loss per share
during either period because to include them would be anti-dilutive due to our
net loss during those periods.





Note
2 - New Accounting Pronouncements





During
the third quarter of 2009, the Company adopted The FASB Accounting Standards
Codification (ASC or Codification) and the Hierarchy of Generally Accepted
Accounting Principles (GAAP)which establishes the Codification as the
sole source for authoritative U.S. GAAP and will supersede all accounting
standards in U.S. GAAP, aside from those issued by the SEC. The adoption of the
Codification did not have an impact on the Company’s results of operations, cash
flows or financial position. Since the adoption of the Accounting Standards
Codification (ASC), the Company’s notes to the consolidated financial
statements will no longer make reference to Statement of Financial Accounting
Standards (SFAS) or other U.S. GAAP pronouncements.





During
the first quarter of 2009, in accordance with U.S. GAAP, the Company adopted new
accounting guidance on business combinations. This guidance requires an entity
to measure the business acquired at fair value and to recognize goodwill
attributable to any non-controlling interests (previously referred to as
minority interests) rather than just the portion attributable to the
acquirer.  The standards also result in fewer exceptions to the
principle of measuring assets acquired and liabilities assumed in a business
combination at fair value.  In addition, the standards require
payments to third parties for consulting, legal, audit and similar services
associated with an acquisition to be recognized as expenses when incurred rather
than capitalized as part of the business combination.  Its adoption
did not have a material impact on our consolidated financial
statements.




During
the first quarter of 2009, in accordance with U.S. GAAP, the Company adopted the
standard on consolidation as it relates to noncontrolling interests. The
standard changed the accounting and reporting for minority interests, which were
recharacterized as noncontrolling interests and classified as a component of
equity. The standard requires retrospective adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
of the standard will be applied prospectively. The adoption of the guidance did
not have a material impact on the Company’s financial statements.




5




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)


During
the first quarter of 2009, in accordance with U.S. GAAP, the Company adopted the
standard related to disclosures about derivative instruments and hedging
activities, to enhance the disclosure regarding the Company’s derivative and
hedging activities to improve the transparency of financial reporting. The
adoption of this standard did not have a significant impact on the Company’s
results of operations, cash flows or financial position.





During
first quarter of 2009, in accordance with U.S. GAAP, the Company adopted the
guidance on determining whether an instrument (or embedded feature) is indexed
to an entity’s own stock. This guidance requires entities to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock in order to determine if the instrument should be accounted for as a
derivative.  The guidance is effective for financial statements issued
for fiscal years beginning after December 15, 2008 and interim periods within
those fiscal years. The adoption of the guidance did not have a material impact
on our consolidated financial statements.





During
the second quarter of 2009, in accordance with U.S. GAAP, the Company adopted
the standards on subsequent events. This pronouncement establishes standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued.  Subsequent events have
been considered in this filing through November 16, 2009.  See Note 10
– Subsequent events for details.





During
the second quarter of 2009, in accordance with U.S. GAAP, the Company adopted
new guidance which requires disclosures about fair value of financial
instruments in interim as well as annual financial statements.  See
Note 4 “Fair Value of
Financial Instruments” for more details.





Note
3 - Fair Value of Financial Instruments





The
Company has adopted the ASC standards of Fair Value Measurements and
Disclosures, for all its financial instruments. The standards establish a
three-level valuation hierarchy for disclosure of fair value measurements. The
valuation hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability as of the measurement date. The three levels are defined
as follows:





●
            Level
      1 — Quoted prices (unadjusted) for identical assets or liabilities in
      active markets●
            Level
      2 — Quoted prices for similar assets or liabilities in active markets;
      quoted prices for identical or similar assets or liabilities in markets
      that are not active; and model-derived valuations whose inputs or
      significant value drivers are observable●
            Level
      3 — Significant inputs to the valuation model are
    unobservable





The
following describes the valuation methodologies we used to measure financial
instruments at fair value.





The
following table provides a summary of the fair value of our derivative
liabilities measured on a recurring basis under ASC standards:





Fair
      value measurements on a recurring basis
              September
      30, 2009Level
      1
            
            
            Level
      2
            
            
            Level
      3AssetsCommodity
      derivatives
            
            $
            -
            
            
            $
            3,832,715
            
            
            $
            -LiabilitiesCommodity
      derivatives
            
            $
            -
            
            
            $
            62,595
            
            
            $
            -





Fair
      value measurements on a recurring basis
              December
      31, 2008Level
      1
            
            
            Level
      2
            
            
            Level
      3AssetsCommodity
      derivatives
            
            $
            -
            
            
            $
            7,283,829
            
            
            $
            -LiabilitiesCommodity
      derivatives
            
            $
            -
            
            
            $
            -
            
            
            $
            -




6




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)


At
September 30, 2009 and December 31, 2008, the Company had commodity derivative
financial instruments in place that are accounted for under the ASC standards on
derivative instruments. The Company does not apply hedge accounting as allowed
by ASC standards, therefore, the changes in fair value subsequent to the initial
measurement are recorded in income. The estimated fair value amounts of the
Company’s derivative instruments have been determined at discrete points in time
based on relevant market information which resulted in the Company classifying
such derivatives as Level 2. Although the Company’s derivative instruments are
valued using public indexes, the instruments themselves are traded with
third-party counterparties and are not openly traded on an
exchange.





As of
September 30, 2009 and December 31, 2008, the Company’s derivative
contracts were with major financial institutions with investment grade credit
ratings which are believed to have a minimal credit risk. As such, the Company
is exposed to credit risk to the extent of nonperformance by the counterparties
in the derivative contracts discussed above; however, the Company does not
anticipate such nonperformance.





The
estimated fair value of short-term financial instruments, including cash,
accounts receivable and accounts payable approximates their carrying value due
to their short-term nature. The estimated fair value of the Company’s Senior
Credit Agreement approximates carrying value because the facility’s interest
rate approximates current market rates.





Note
4 - Acquisitions





On
September 14, 2009, the Company entered into a Purchase and Sale Agreement (the
“Purchase Agreement”) with Centurion Exploration Company, LLC to acquire for
$1.7 million all of Centurion’s ownership interest in the Company operated East
Chalkley Unit located in Cameron Parish, Louisiana.  The purchase of
Centurion’s 37.5% working interest increased the Company’s working interest to
approximately 72%.  At the time of the Purchase and Sale agreement,
the Company made a cash deposit of $127,500 which is accounted for in oil and
gas properties. On October 15, 2009 the Company completed the purchase of the
ownership interest.   On October 23, 2009, the Company
subsequently sold 10% of their interest in East Chalkley Unit with a different
effective date.  See Note 10 – Subsequent Events for additional
information.





On
September 30, 2009, Magnum Hunter Resources Corporation (the “Company”)
completed the acquisition of 100% of the capital stock of Sharon Resources, Inc.
(“Sharon”), a wholly owned subsidiary of Calgary based Sharon Energy Ltd.,
whereby the Company acquired 100% of the outstanding common stock of Sharon in
exchange for 2,294,474 shares of the Company’s common stock valued at
approximately $2.68 million based on the closing stock price of $1.17 on the
effective date of the closing.





The
acquisition of Sharon is accounted for using the acquisition method as set out
in FAS ASC 805, Business
Combinations, which requires the purchase price to be allocated to the
fair value of the net assets acquired.  The following table summarizes
the purchase price and related allocation o the net assets acquired at September
30, 2009:





AssetsCash
            
            $
            235,023Accounts
      receivable
            
            
            288,125Pre-paids
            
            
            2,394Deposits
            
            
            750Oil
      and gas properties
            
            
            2,972,534Liabilities and equityAccounts
      payable
            
            
            (664,080
            )Asset
      retirement obligation
            
            
            (150,211
            )Net
      assets acquired
            
            $
            2,684,535





7


MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
5 - Derivative Financial Instruments





We
entered into commodity derivative financial instruments intended to hedge our
exposure to market fluctuations of oil and natural gas prices. As of
September 30, 2009, we had commodity swaps for the following oil
volumes:





Barrels
      per
              quarter
            
            
            Barrels
      per
              day
            
            
            Price
      per
              barrel2009Fourth
      quarter
            
            
            8,400
            
            
            
            91
            
            
            $
            72.552010First
      quarter
            
            
            14,825
            
            
            
            165
            
            
            $
            93.50Second
      quarter
            
            
            15,000
            
            
            
            165
            
            
            $
            105.45Third
      quarter
            
            
            15,000
            
            
            
            163
            
            
            $
            105.45Fourth
      quarter
            
            
            15,000
            
            
            
            163
            
            
            $
            105.452011First
      quarter
            
            
            13,500
            
            
            
            150
            
            
            $
            105.45Second
      quarter
            
            
            13,500
            
            
            
            148
            
            
            $
            105.45Third
      quarter
            
            
            13,500
            
            
            
            147
            
            
            $
            105.45Fourth
      quarter
            
            
            13,500
            
            
            
            147
            
            
            $
            105.45





As of
September 30, 2009, the fair value of the above commodity swaps amounted
to $3,189,349.





On June
5, 2008, the Company purchased a floor at $110 per barrel for 100 bbls per day
for the calendar year 2009 for a price of $363,175.  As
of September 30, 2009 the fair value of the floor was
$480,089.





On
October 6, 2008, the Company purchased a floor at $7.75 per MCF for 20,000 MCF
per month for the calendar year 2009 for a price of $200,400. As
of September 30, 2009 the fair value of the floor was
$100,682.





During
nine months ended September 30, 2009, the Company incurred a net loss of
$1,027,467 related to derivative contracts. Included in this loss was $2,486,242
of realized gains related to settled contracts, and $3,513,709 of unrealized
losses related to unsettled contracts. Unrealized gain and losses are
based on the changes in the fair value of derivative instruments covering
positions beyond September 30, 2009.





Note
6 - Note payable





On April
10, 2009, the Company signed a promissory note with a finance company for
$217,336 to finance its various insurance policies. The interest rate on the
note is 4.75% with payments of $22,210 per month beginning May 1, 2009 and the
final payment due February 1, 2010. The note is secured by the insurance
policies.





Note
7 - Long-term debt





Long-term
debt at September 30, 2009 and December 31, 2008 consist of the
following:





September
      30,
            
            
            December
      31,Interest
      rate
            
            
            2009
            
            
            2008Revolving
      credit borrowings
            
            
            2.68%
      - 5.75%
            
            
            
            12,000,000
            
            
            
            6,500,000Term
      loan
            
            
            8.07%
      - 10.00%
            
            
            
            15,000,000
            
            
            
            15,000,000$
            27,000,000
            
            
            $
            21,500,000





On April
16, 2009 and July 13, 2009, the Company borrowed $1 million and $4.5 million,
respectively, against its revolving credit facility.




8




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)




The
revolving credit borrowings bear interest, at the Company's option, at either a
fluctuating base rate or a rate equal to LIBOR plus, in each case, a margin
determined based on the Company's utilization of the borrowing
base.  The term loan bears interest, at the Company's option, at a
fluctuating base rate plus 6.50% per annum or a rate equal to LIBOR plus 7.50%
per annum.  If an event of default occurs and is continuing, the
lenders may increase the interest rate then in effect by an additional 2% per
annum.





The above
loans contain covenants that, among others things, restrict the ability of the
Company to, with certain exceptions: (1) incur indebtedness; (2) grant liens;
(3) acquire other companies or assets; (4) dispose of all or substantially all
of its assets or enter into mergers, consolidations or similar transactions; (5)
make restricted payments; (6) enter into transactions with affiliates; and (7)
make capital expenditures.  The Company is also required to satisfy
certain financial covenants, as amended on March 19, 2009, which included
maintaining the following (1) a ratio of EBITDAX to Interest Expense of not less
than 2.0:1.0 for the fiscal quarters ending March 31, 2009 and June 30, 2009;
2.25:1.0 for the fiscal quarters ending September 30, 2009 and December 31, 2009
and 2.5:1.0 for all fiscal quarters ending thereafter ; (2) a ratio of Total
Reserve Value to Debt of not less than 1.75:1.0 as of any date of determination;
(3) a ratio of  Net Debt to EBITDAX of not more than (a) 6.5:1.0 for
2009; 6.0:1 for 2010 and 5.0 for all fiscal quarters ending thereafter; and (4)
a ratio of consolidated current assets to consolidated current liabilities of
not less than 1.0:1.0.





PRC
Williston LLC, the Company's majority-owned subsidiary ("PRC Williston"),
has guaranteed the performance of all of the Company's obligations for the above
loans.  Subject to certain permitted liens, the Company's obligations
have been secured by the grant of a first priority lien on not less than 80% of
the value of the Company's and PRC Williston's existing and to-be-acquired oil
and gas properties and the grant of a first priority security interest in
related personal property of the Company and PRC Williston. The Company has also
granted a first priority security interest in its ownership interest in PRC
Williston, subject only to certain permitted liens.





As a
result of the Company's concern regarding the financial condition of its lender
CIT, the Company drew down the remaining balance of its credit facility on July
13, 2009. The Company was not in compliance with its EBITDAX to interest
covenant during the third quarter. Therefore, the Company obtained a waiver from
CIT. During the fourth quarter the Company has raised approximately $15 million
in equity and has also obtained a commitment for a new $150 million credit
facility. The new credit facility will substantially reduce interest costs to
the Company and is expected to close by November 30, 2009. The Company is
currently in compliance with all of its bank covenants (after the waiver) and
anticipates being in compliance with all such covenants for the fourth
quarter.





Note
8 - Share Based Compensation





On May
22, 2009, the Company granted 4,000,000 stock options to employees of the
Company. The stock options have an exercise price of $0.37 per share and expire
May 22, 2014. The options vest as follows: (a) Options to purchase 1,000,000
Shares shall vest and first become exercisable subject to and upon the Company’s
acquisition of at least $20 million of additional debt capital, equity capital,
or oil and gas properties, or any combination thereof, whether in one
transaction or in a series of transactions, during the period commencing on the
grant date and ending on May 22, 2010. (b) Options to purchase
1,000,000 Shares shall vest and first become exercisable subject to and upon the
Common Stock trading at a price of $0.75 per share (as adjusted for splits,
combinations and the like) for 20 of any 30 consecutive trading days during the
period commencing on the grant date and ending on May 22, 2011. (c) Options to
purchase 1,000,000 Shares shall vest and first become exercisable subject to and
upon the Common Stock trading at a price of  $1.25 per share (as
adjusted for splits, combinations and the like) for 20 of any 30 consecutive
trading days during the period commencing on the grant date and ending on May
22, 2012. (d) Options to purchase 1,000,000 Shares shall vest and first become
exercisable subject to and upon the Company achieving daily production of 1,400
boe per day during the period commencing on the grant date and ending on May 22,
2011. The term “boe” means
barrels of crude oil equivalent, determined using the ratio of six mcf of
natural gas to one bbl of crude oil, condensate or natural gas liquids. These
options were valued using the Lattice model which made use of the following
primary assumptions:





Expected
      volatility
            189%
      to 337%Expected
      dividend yield
            0Risk
      free rate
            0.49%
      to 2.23%





The
combined fair value of these stock options was determined to be
$884,561.




9




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)


On May
22, 2009, the Company also granted 4,000,000 shares of Restricted Stock to
employees of the Company. The shares of Restricted Stock become vested in the
following amounts, at the following times and upon the following conditions,
provided that the new employee remains in continuous employment of the Company
through and on the applicable vesting date: (a) 1,500,000 Shares shall vest on
January 1, 2010. (b) 625,000 Shares shall vest subject to and the Company’s
acquisition of at least $20 million of additional debt capital, equity capital,
or oil and gas properties, or any combination thereof, whether in one
transaction or in a series of transactions, during the period commencing on the
grant date and ending on  May 22, 2010.  (c) 625,000 Shares
shall vest subject to and upon the Common Stock trading at a price of $0.75 per
share (as adjusted for splits, combinations and the like) for 20 of any 30
consecutive trading days during the period commencing on the grant date and
ending on May 22, 2011. (d)  625,000 Shares shall vest subject to and
upon the Common Stock trading at a price of $1.25 per share (as adjusted for
splits, combinations and the like) for 20 of any 30 consecutive trading days
during the period commencing on the grant date and ending on May 22,
2012.  (e) 625,000 Shares shall vest subject to and upon the Company’s
satisfaction in full of the performance condition set forth in Section 2(d) of
the Option Agreement on or before May 22, 2011. The Restricted Stock also shall
become vested at such earlier times, if any, as shall be provided in the
restricted stock agreement or as shall otherwise be determined by the
Compensation Committee in its sole and absolute discretion. Restricted stocks
that contain both service and performance conditions were valued using the share
price at grant date determined to be $0.35 per share for a total fair value of
$962,500. Restricted stocks that contain both service and market conditions were
valued using the Lattice model which made use of the following primary
assumptions:





Expected
      volatility
            189%
      to 337%Expected
      dividend yield
            0Risk
      free rate
            0.49%
      to 2.23%





The fair
value of these restricted shares was determined to be $287,045.





On June
12, 2009 the Company granted a total of 172,000 stock options to certain
employees.  These stock options have an exercise price of $0.69
per share of which 43,000 vested immediately. The remaining 129,000
stock options will be issued and will vest annually on June 12, 2010, 2011
and 2012. The stock options have a five year term expiring on June 12,
2014. The stock options were valued using the Black-Sholes model with the
following assumption: $0.69 quoted stock price; $0.69 exercise price; 123.5%
volatility; 3.25 year estimated life; zero dividends and a 1.91% discount rate.
The fair value of these options was determined to be $88,122.





On June
12, 2009 we also granted 100,000 shares of restricted common stock to an
employee of the Company, of which 25,000 vested immediately. In connection with
this issuance, we recorded $19,365 as compensation expense based on the closing
price of our common stock on June 12, 2009. We also agreed to issue 25,000
additional restricted common shares on June 1, 2010, 2011 and 2012, which vest
immediately upon each respective issuance, for an aggregate of 75,000 shares.
Compensation expense related to these shares is accrued monthly.





On June
26, 2009, the Company granted 100,000 stock options each to three existing
board members and 130,000 stock options each to two of its existing board
members. The stock options have an exercise price of $0.51 per share. The stock
options fully vested on June 26, 2009, and have a 10 year term expiring June 26,
2019. The stock options were valued using the Black-Sholes model with the
following assumption: $0.51 quoted stock price; $0.51 exercise price; 124.76%
volatility; 5 year estimated life; zero dividends; 2.53% discount rate. The fair
value of these options was determined to be $241,895.





On July
13, 2009, the Company granted 350,000 shares of stock options to an employee of
the company.  The options were issued at an exercise price of $ .57
per share with an estimated fair value of $.24 per share and have a life of 5
years. The options vest as follows: a) 70,000 shall vest on July 13, 2010
provided that the Optionee is employed by the Corporation as of the close of
business on July 13, 2010. b) 70,000 options shall vest at any time prior to
January 13, 2011 provided that the Optionee is employed by the Corporation and
that the Common Stock of the Corporation has traded at a daily VWAP of $1.00 or
more for 20 of 30 consecutive trading days. c) 70,000 options shall vest at any
time prior to July 13, 2011 provided that the Optionee is employed by the
Corporation and that at least five (5) new equity research analysts have
initiated research coverage on the Corporation on or after July 13, 2009. d)
70,000 options shall vest at any such time prior to July 13, 2012 provided that
the Optionee is employed by the Corporation and that the Common Stock of the
Corporation has traded at a daily VWAP of $2.00 or more for 20 of 30 consecutive
trading days.  e) 70,000 options shall vest at any time prior to July
13, 2012 provided that the Optionee is employed by the Corporation and that the
total institutional ownership of the Corporation’s Common Stock has increased by
an amount equal to or greater than 50% of the fully diluted outstanding shares
on the vesting date in excess of the number of shares held by institutional
owners as of the Corporation’s June 3, 2009 Proxy Statement. Notwithstanding the
foregoing, in the event of a Change in Control of the Company on or after
September 1, 2006, then all Options shall vest and become immediately
exercisable in full and will remain exercisable in accordance with their terms.
These options were valued using the Lattice model which made use of the
following primary assumptions:





Expected
      volatility
            48.2%
      to 434.4%Expected
      dividend yield
            0Risk
      free rate
            0.17%
      to 4.30%




10




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)


On August
17, 2009, the Company granted 100,000 stock options to a new board member. The
stock options have an exercise price of $1.04 per share. The stock options fully
vested on August 17, 2009, and have a 10 year term expiring August 17, 2019. The
stock options were valued using the Black-Sholes model with the following
assumption: $1.04 quoted stock price; $1.04 exercise price; 125.49% volatility;
5 year estimated life; zero dividends; 2.43% discount rate. The fair value of
these options was determined to be $88,285.





On
September 30, 2009, the Board of Directors authorized the issuance of 600,000
stock options to employees of the company.  The options have an
exercise price of $1.17 per share. The options have a life of 5 years of which
150,000 vested immediately and the remaining 450,000 vest in equal amounts over
3 years. The stock options were valued using the Black-Sholes model with the
following assumption: $1.17 quoted stock price; $1.17 exercise price; 127.48%
volatility; 3.25 year estimated life; zero dividends; 1.45% discount rate. The
fair value of these options was determined to be $530,229.





The
Company recognized stock compensation expense of $1,762,176 and $1,220,552 for
the nine months ended September 30, 2009 and 2008 respectively.





A summary
of stock option activity for the nine months ended September 30, 2009 is
presented below:





Shares
            
            
            Weighted-
              Average
              Exercise
      PriceOutstanding
      at December 31, 2008
            
            
            1,035,000
            
            
            $
            3.11Granted
            
            
            5,782,000
            
            
            
            .50Exercised,
      forfeited, or expired
            
            
            (25,000
            )
            
            
            2.50Outstanding
      at September 30, 2009
            
            
            6,792,000
            
            
            
            .89Exercisable
      at December 31, 2008
            
            
            752,500
            
            
            
            3.56Exercisable
      at September 30, 2009
            
            
            2,708,000
            
            
            $
            1.41





A summary
of the Company’s non-vested options as of September 30, 2009 is presented
below.





Non-vested
      Options
            
            SharesNon-vested
      at December 31, 2008
            
            
            282,500Granted
            
            
            5,782,000Vested
            
            
            (1,955,500
            )Forfeited
            
            
            (25,000)Non-vested
      at September 30, 2009
            
            
            4,084,000





Total
unrecognized compensation cost related to the non-vested options amounted to
$1,094,265 and $850,355 as of September 30, 2009 and 2008 respectively. The cost
at September 30, 2009 is expected to be recognized over a weighted-average
period of 1.75 years. The aggregate intrinsic value for options was $3,875,160;
and the weighted average remaining contract life was 4.81 years.





A summary of the Company’s non-vested shares as of
September 30, 2009 is presented below:





Non-vested
      Shares
            
            Shares
            
            
            Price
      Per ShareNon-vested
      at December 31, 2008
            
            
            215,000
            
            
            
            2.04Granted
            
            
            4,100,000
            
            
            
            .32Vested
            
            
            (730,000
            )
            
            
            .52Forfeited
            
            
            (25,000
            )
            
            
            2.50Non-vested
      at September 30, 2009
            
            
            3,560,000
            
            
            
            .37





Total
unrecognized compensation cost related to the above non-vested shares amounted
to $873,580 and $341,745 as of September 30, 2009 and 2008 respectively. The
cost at September 30, 2009 is expected to be recognized over a weighted-average
period of .85 year.




11




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
9 - Equity





A summary
of warrant activity for the nine months ended September 30, 2009 is presented
below:





Shares
            
            Weighted-
              Average
              Exercise
      PriceOutstanding
      at December 31, 2008
            6,838,962
            
            $
            2.15Granted
            -
            
            
            -Exercised,
      forfeited, or expired
            -
            
            
            -Outstanding
      at September 30, 2009
            6,838,962
            
            $
            2.15Exercisable
      at December 31, 2008
            6,838,962
            
            $
            2.15Exercisable
      at September 30, 2009
            6,838,962
            
            $
            2.15





The
aggregate intrinsic value for warrants was $0; and the weighted average
remaining contract life was 1.17 years.





Note
10 - Subsequent Events





The
Company evaluated all events or transactions that occurred after September 30,
2009 up through November 16, 2009, the date the Company issued these financial
statements and identified the following nonrecognizable subsequent
events:





On
October 2, 2009, the Company made several management additions in the Company's
exploration, administration, legal and finance departments. These changes
address the addition of three new exploration professionals added from the
recent closing of the Sharon Resources, Inc. acquisition as announced on
September 30, 2009, and several internal changes to management responsibilities
and associated corporate titles.





On
October 23, 2009, the Company sold approximately 10% of the Company’s ownership
interest in the Company operated East Chalkley Unit.





On
October 26, 2009 the Company received a commitment for a new $150 million
three-year term senior secured revolving credit facility ("the new bank
facility") provided by the Bank of Montreal ("BMO"). The new bank facility will
be used for general corporate purposes, including the acquisition of crude oil
and natural gas properties.





The new
bank facility will be governed by a semi-annually predetermined borrowing base
value assigned to the Company's proved crude oil and natural gas reserves. An
initial borrowing base of $25 million has been established. Based on values
assigned to crude oil and natural gas properties which may be either acquired or
discovered over time, the Company's borrowing base may be increased up to a
maximum of the $150 million commitment level.





All other
terms and conditions are those usual and customary for this type of commercial
bank borrowing facility. The applicable interest rate margin for this new bank
facility will range from LIBOR plus 2.50% to LIBOR plus 3.50% depending on the
actual level of outstanding borrowings. The final agreement, which will include
the specific terms and covenants governing the Company's new bank facility, will
be filed with the Securities and Exchange Commission at closing.





The final
closing of this new bank facility is anticipated prior to November 30,
2009.





On
October 29, 2009, the Company entered into a definitive agreement with an
Appalachian Basin energy company, privately-held Triad Energy Corporation and
affiliates (collectively "Triad"), to purchase substantially all of Triad's oil
and gas exploration and production operating assets.  Additionally, as
part of the transaction, 100% of Triad's ownership interests in certain oilfield
service related drilling, pipeline and salt water disposal assets are being
acquired. The acquisition of Triad will occur upon the effectiveness of Triad's
reorganization plan under Chapter 11 of the United States Bankruptcy Code. Under
Triad's proposed plan of reorganization, the assets of Triad along with certain
affiliates would be acquired by a wholly-owned subsidiary of the
Company.





The
Company has agreed to pay cash, issue securities and assume or refinance Triad's
outstanding debt obligations in the aggregate of approximately $81 million. The
$81 million total purchase price is broken out in components of (i) the
assumption and refinancing of approximately $58 million of senior debt owed to
secured lenders, (ii) issuance to Triad or its designees of $15 million in
Redeemable Convertible Preferred Stock with a 2.75% fixed coupon payable
quarterly and (iii) up to $8 million in cash.




12




MAGNUM
HUNTER RESOURCES CORPORATION
 (FORMERLY
PETRO RESOURCES CORPORATION)
 Notes
to Consolidated Financial Statements
 (Unaudited)
  The
closing of this transaction is subject to customary conditions, as well as final
approval of the Federal Bankruptcy Court. The Company has obtained an agreement
with Triad and its principal secured and unsecured creditors to fully support
the proposed transaction. The closing of the transaction is expected to occur in
late 2009 or early 2010.  On November 6, 2009, the Company issued
601,652 shares of common stock valued at $1.1 million as a
deposit.





On
November 5, 2009, the Company sold, for gross proceeds of approximately $3.8
million, an aggregate of 2.3 million shares of the Company's common stock,
together with one fifth of a warrant to purchase one share of the Company's
common stock for each share of common stock purchased. Each warrant issued to a
purchaser will (i) be exercisable for one share of the Company's common stock at
any time after the shares of common stock underlying the warrant are registered
with the SEC for resale pursuant to an effective registration statement, (ii)
have a cash exercise price of $2.50 per share of the Company's common stock, and
(iii) upon notice to the holder of the warrant, be redeemable by the Company for
$0.01 per share of the Company's common stock underlying the warrant if (a) the
Registration Statement as filed with the SEC is effective and (b) the average
trading price of the Company's common stock as traded and quoted on the NYSE
Amex equals or exceeds $3.75 per share for at least 20 days in any period of 30
consecutive days. The Company's common stock purchased in this transaction was
issued pursuant to a prospectus supplement filed with the SEC in connection with
a takedown from the Company's existing $100 million universal shelf registration
statement on Form S-3, which became effective on October 15, 2009. Purchasers of
this issuance of common shares by the Company included, amongst others, the
Company’s Chairman, Vice Chairman, Executive Vice President and Chief Financial
Officer, and three other members of the Company's Board of
Directors.





On
November 10, 2009, the Company entered into definitive agreements with certain
institutional investors to sell 3,903,720 units, with each unit consisting of
one of the Company's common shares and a one fifth of a warrant to purchase one
common share, for gross proceeds of approximately $6.75 million, before
deducting placement agent fees and estimated offering expenses, in a "registered
direct" offering. The investors have agreed to purchase the units at a purchase
price of $1.73 per unit. The warrants, which represent the right to acquire an
aggregate of up to 780,744 common shares, will be exercisable at any time on or
after May 17, 2010 and prior to the 3-year anniversary of the closing of the
transaction at an exercise price of $2.50 per share, which was 132% of the
closing price of the Company's common shares on the NYSE AMEX on November 10,
2009.  The transaction is expected to close on November 16, 2009,
subject to customary closing conditions. Magnum Hunter intends to use the
proceeds from the offering to repay current borrowings under its revolving
credit facility, to pursue acquisition opportunities, and for other working
capital purposes.





On
November 11, 2009 the Company entered into definitive agreements with certain
institutional investors to sell an additional 2,500,000 units to investors that
participated in the $6.75 million offering, with each unit consisting of one of
the Company's common shares and a one fifth of a warrant to purchase one common
share, for gross proceeds of approximately $4.325 million, before deducting
placement agent fees and estimated offering expenses, in a "registered direct"
offering. The total amount raised in the "registered direct" offering amounts to
$11.078 million of gross proceeds before deducting placement agent fees and
estimated offering expenses. The investors have agreed to purchase the units at
a purchase price of $1.73 per unit. The warrants, which represent the right to
acquire an aggregate of up to 500,000 common shares, will be exercisable at any
time on or after May 17, 2010 and prior to the 3-year anniversary of the closing
of the transaction at an exercise price of $2.50 per share, which was 145% of
the closing price of the Company's common shares on the NYSE AMEX on November
11, 2009.  The transaction is expected to close on November 16, 2009,
subject to customary closing conditions. Magnum Hunter intends to use the
proceeds from the offering to repay current borrowings under its revolving
credit facility, to pursue acquisition opportunities, and for other working
capital purposes. The new equity capital raised in these offerings satisfies the
Company's minimum equity commitment required under the terms of the Asset
Purchase Agreement in connection with the acquisition of Triad Energy
Corporation and certain affiliates announced on October 29, 2009.





The
Company issued 187,482 shares of common stock in November, 2009 pursuant to the
At the Market sales agreement as disclosed in the amended S-3 filed October 14,
2009.




13




ITEM
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Industry
terms used in this report are defined in the Glossary of Oil and Natural Gas
Terms located at the end of this Item





In this
report we make, and from time to time we otherwise make, written and oral
statements regarding our business and prospects, such as projections of future
performance, statements of management’s plans and objectives, forecasts of
market trends, and other matters that are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Statements containing the words or
phrases “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,”
“intends,” “target,” “goal,” “plans,” “objective,” “should” or similar
expressions identify forward-looking statements, which may appear in documents,
reports, filings with the Securities and Exchange Commission, news releases,
written or oral presentations made by our officers or other representatives to
analysts, stockholders, investors, news organizations and others, and
discussions with management and other of our representatives. For such
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995.





Our
future results, including results related to forward-looking statements, involve
a number of risks and uncertainties. No assurance can be given that the results
reflected in any forward-looking statements will be achieved. Any
forward-looking statement speaks only as of the date on which such statement is
made. Our forward-looking statements are based upon assumptions that are
sometimes based upon estimates, data, communications and other information from
operators, government agencies and other sources that may be subject to
revision. Except as required by law, we do not undertake any obligation to
update or keep current either (i) any forward-looking statement to reflect
events or circumstances arising after the date of such statement, or
(ii) the important factors that could cause our future results to differ
materially from historical results or trends, results anticipated or planned by
us, or which are reflected from time to time in any forward-looking
statement.





There are
several important factors that could cause our future results to differ
materially from historical results or trends, results anticipated or planned by
us, or results that are reflected from time to time in any forward-looking
statement. Some of these important factors, but not necessarily all important
factors, are included in our filings with the SEC, including the risk factors
set forth of our annual report on Form 10-K for our 2008 fiscal year filed with
the SEC on March 31, 2009.





General





Magnum
Hunter Resources Corporation and subsidiaries (“Magnum Hunter”) is a Houston,
Texas based independent exploration and production company engaged in the
acquisition and development of producing properties, secondary enhanced oil
recovery projects, and production of oil and natural gas in the United
States.





We
develop and produce low to medium risk projects that have the potential for
multiple producing horizons, and offer repeatable success allowing for
meaningful production and reserve growth. We currently own interests in
approximately 294,782 gross (56,611 net) leasehold acres, of which 265,647 gross
(47,281 net) acres are classified as undeveloped acreage.





In 2007,
we acquired oil and gas producing assets in the Williston Basin area of North
Dakota and added mineral acreage in the Permian Basin located in West Texas. In
2008, we participated in new prospects located in southwest Louisiana as well as
in east Texas.  During 2009, the Company began to operate several of our
projects with the intention of operating a much larger portion of our
projects in the future.  In May 2009, Messrs. Gary C. Evans and Ronald
D. Ormand joined the Company as Chairman of the Board and Executive Vice
President and Chief Financial Officer, respectively.





As of
September 30, 2009, we held interests in approximately 248 producing wells in
Texas, Louisiana and North Dakota.  Our current drilling inventory
includes prospects located in Texas, Louisiana, New Mexico, North Dakota and
Kentucky.





We
recognize the value of hedging oil and gas production through both derivative
and physical contracts to help stabilize future cash
flow.  During the second and third quarters of 2008, we entered into
three separate hedging agreements.  In June 2008, we purchased put
options for crude oil at a price of $110 per bbl for 100 bbls per day of
production during 2009.  The cost of these crude oil put options was
$363,175. We also entered into swap agreements in September 2008, covering
207,400 barrels of crude oil at a price of $105 per bbl for the period of
October 2008 to December 2011.  We incurred no cost in entering into
these swap agreements.  In addition to crude oil hedges, we hedged
natural gas production in October 2008.  We purchased natural gas put
options at a strike price of $7.75 per mcf for 658 mcf per day (240,000 total
mcf) of production during 2009. The cost of these natural gas put options was
$200,400.





14




As of
June 30, 2009, our total proved reserves were 3,726 mboe, a gain of 608,000 Boe
from year end 2008 of 3,118 mboe. This gain in proved reserves was primarily the
result of gains from North Dakota proved reserves of 402 mboe. The total June
30, 2009 mid-year 2009 proved reserves is comprised of 2,910 mbbls of crude oil
and NGLs and 816 mboe of natural gas. All mid-year reserve estimations were
calculated internally by Magnum Hunter Resources engineering
personnel.





Our
executive offices are located at 777 Post Oak Blvd., Suite 910, Houston, Texas
77056, and our telephone number is (832) 369-6986.  Our web site is
www.magnumhunterresources.com. 
Additional information which may be obtained through our web site does not
constitute part of this quarterly report on Form 10-Q.  A copy of this
quarterly report on Form 10-Q is located at the SEC’s Public Reference Room at
100 F Street, NE, Washington, DC 20549.  Information on the operation
of the SEC’s Public Reference Room can be obtained by calling the SEC at
1-800-SEC-0330.  The SEC also maintains an internet site that contains
reports, proxy and information statements and other information regarding our
filings at www.sec.gov.





Results
of Operations





For
the three months ended September 30, 2009 compared to the three months ended
September 30, 2008





The
Company’s net production decreased by 3,425 boe from 57,353 boe in the 2008
period to 53,928 boe for the quarter ended September 30, 2009.  Production
for the quarter ended September 30, 2009 included 30,305 barrels of oil, 91,982
mcf of natural gas, 8,293 barrels of natural gas liquids, compared to, 35,012
barrels of oil, 105,239 mcf of natural gas, and 4,801 barrels of natural gas
liquids for the quarter ended September 30, 2008.





For the
quarter ended September 30, 2009, the average daily production was approximately
589 boe per day compared to average daily production of 623 boe per day for the
quarter ended September 30, 2008.





The
Company's realized commodity prices for the quarter ended September 30, 2009
were approximately $59.53 per barrel of oil, $2.52 per mcf of natural gas, and
$34.38 per barrel of natural gas liquids compared to $106.33 per barrel of oil,
$7.34 per mcf of natural gas, and $59.82 per barrel of natural gas liquids for
the comparable prior year period.





Revenue
for the quarter ended September 30, 2009 consisted $2,320,514 of oil and gas
sales compared to oil and gas sales of $4,782,933 for the quarter ended
September 30, 2008. The decrease in revenue from oil and gas sales was due
primarily to significantly lower commodity prices. In addition, the Company
recorded a gain of $1,181,963 on the sale of certain assets in the third quarter
of 2008.





Lease
operating expenses for the quarter ended September 30, 2009 totaled $1,288,850
compared to lease operating expenses of $1,492,163 for the prior year comparable
period. The decline is attributed to decreased production volumes as well as a
modest decrease in services costs, including non-recurring lease operating
expenses of approximately $135,000 in our East Chaulkley Field.





Exploration
costs for the quarter ended September 30, 2009 were $278,689 compared to
$2,179,388 for the quarter ended September 30, 2008.  Exploration
costs represent our drilling costs associated with dry holes and the carrying
costs of properties. The decrease in exploration costs is the result of fewer
dry hole expenses due to our curtailment of exploratory drilling and our more
conservative approach to future drilling opportunities.





Our
expenses for depreciation, depletion, and accretion for the quarter ended
September 30, 2009 totaled $993,380 compared to $718,513 for the same period in
the prior year. This was due to increased depletion rates as a result of shorter
economic limits on properties during lower commodity price cycles and the
acquisition of additional working interest at East Chalkley, effective July 1,
2009, which increased production and resulted in higher operating costs until a
salt water disposal well is installed.





General
and administrative expenses for the quarter ended September 30, 2009 totaled
$2,329,401 compared to general and administrative expenses of $817,811 for the
prior year period. The general and administrative expense increase for the third
quarter of 2009 was due to: (i) non-recurring transactional expenses associated
with the transactions including the acquisition of Sharon Resources, Inc. and
Triad of approximately $100,000, (ii) non-recurring expenses of approximately
$250,000 during the third quarter of 2009 associated with certain changes in the
senior management of the Company, and (iii) non-cash charges related to the
vesting of incentive stock options due to performance.





We
incurred a net loss from operations of $2,569,806 for the quarter ended
September 30, 2009 compared to a net gain from operations of $757,021 during the
same period in the prior year.   The increase in net loss is due
to lower revenue because of lower commodity prices, higher depletion, and
one-time general and administrative expenses.





During
the quarter ended September 30, 2009, interest expense totaled $688,469,
compared to $1,066,477 for the quarter ended September 30, 2008.  The
decrease in interest expense was principally due to the new credit agreement
with CIT on September 9, 2008, which substantially reduced finance
charges.




15




Beginning
in March 2007, we entered into commodity derivative financial instruments for
purposes of hedging our exposure to market fluctuations of oil
prices.  During the quarter ended September 30, 2009, we recorded a
gain on derivative contracts of $190,637 compared to a gain of $2,477,405 for
the comparable period in 2008.  Our gain on derivative contracts for
the 2009 period include both $675,168 in gains on the actual settlement of
certain derivative financial instruments during the quarter and the unrealized
loss of $484,531 based on the changes in the fair value of derivative
instruments covering positions beyond September 30, 2009.





We
incurred a net loss attributable to common shareholders of $3,052,222 ($0.08 per
share) during the quarter ended September 30, 2009, compared to a net loss of
$535,538 ($0.01 per share) to common shareholders for the same period in
2008.  The increase in net loss is due to lower revenue because of
lower commodity prices, higher depletion, and one-time general and
administrative expenses.





For
the nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008





The
Company’s net production for the nine months ended September 30, 2009 included
100,556 barrels of oil, 341,633 mcf of natural gas, and 31,440 barrels of
natural gas liquids for a barrel-equivalent total of 188,935 boe.
This compared to 95,869 barrels of oil, 227,762 mcf of natural gas, and
14,358 barrels of natural gas liquids for a barrel-equivalent total of 148,188
boe for the nine months ended September 30, 2008.





For the
nine months ended September 30, 2009, the average daily production was
approximately 692 boe per day compared to average daily production of 543 boe
per day for the nine months ended September 30, 2008.





The
Company's realized commodity prices for the nine months ended September 30, 2009
were $47.94 per barrel of oil, $2.79 per mcf of natural gas, and $25.23 per
barrel of natural gas liquids compared to $102.23 per barrel of oil, $7.21 per
mcf of natural gas, and $53.49 per barrel of natural gas liquids for the
comparable prior year period.





Revenues
for the nine months ended September 30, 2009 totaled $6,766,441 compared to
revenues of $13,491,339 for the nine months ended September 30, 2008. Revenue
for the nine months ended September 30, 2009 consisted $6,566,441 of oil and gas
sales compared to oil and gas sales of $12,209,376 for the nine months ended
September 30, 2008. The decrease in revenue from oil and gas sales was due
primarily to a decrease in commodity prices.





Lease
operating expenses for the nine months ended September 30, 2009 totaled
$3,806,617 compared to lease operating expenses of $4,061,269 for the prior year
comparable period. The slight decrease in lease operating expenses is due
primarily to the fact that operating expenses are beginning to come down as
commodity prices decrease.





Exploration
costs for the nine months ended September 30, 2009 were $392,365 compared to
$2,789,552 for the nine months ended September 30, 2008. Exploration costs
represent our drilling costs associated with dry holes and the carrying costs of
properties. The decrease in exploration costs is the result of fewer dry hole
expense due to our curtailment of exploratory drilling and our more
conservative approach to future drilling opportunities.





Our
expenses for depreciation, depletion, and accretion for the nine months ended
September 30, 2009 totaled $3,100,242, compared to $1,855,706 for the same
period in the prior year. This was due to an increase in depletion
rates.





General
and administrative expenses for the nine months ended September 30, 2009 totaled
$4,521,076 compared to general and administrative expenses of $3,005,583 for the
prior year period. The general and administrative expense increase for the third
quarter of 2009 was due to: (i) non-recurring transactional expenses associated
with the acquisition of Sharon Resources, Inc. and Triad and (ii) non-recurring
expenses during the third quarter of 2009 associated with certain changes in the
senior management of the Company, and (iii) non-cash charges related to the
vesting of incentive stock options due to performance.





We
realized a loss from operations of $5,053,859 for the nine months ended
September 30, 2009 compared to net income from operations of
$1,779,229 during the same period in the prior year.   The
increase in net loss is due to lower revenue because of lower commodity prices,
higher depletion because of increased production, and one-time general and
administrative expenses.





During
the nine months ended September 30, 2009, interest expense totaled $1,866,655,
compared to $2,172,257 for the nine months ended September 30,
2008.  The decrease in interest expense was principally due to the new
credit agreement with CIT on September 9, 2008, whereby finance charges were
significantly reduced.





Beginning
in March 2007, we entered into commodity derivative financial instruments for
purposes of hedging our exposure to market fluctuations of oil
prices.  During the nine months ended September 30, 2009, we incurred
a loss on derivative contracts of $1,027,467 compared to a loss of $986,245 for
the comparable period in 2008. Our loss on derivative contracts include both
$2,486,242 in gains on the actual settlement of certain derivative financial
instruments during nine months ended September 30, 2009 and the unrealized
losses related to unsettled swap contracts and the floors of $3,513,709.
Unrealized losses are based on the changes in the fair value of derivative
instruments covering positions beyond September 30, 2009.




16




We
incurred a net loss attributable to common stockholders of $7,817,081 ($0.21 per
share) during the nine months ended September 30, 2009, compared to a net loss
of $4,052,569 ($0.11 per share) for the same period in 2008.  The
increase in net loss is due to lower revenue because of lower commodity prices
and one-time general and administrative expenses.





Reserves





Our
natural gas and crude oil reserves have been estimated internally as of June 30,
2009 by Magnum Hunter engineering personnel based predominantly on third party
prepared engineering reports.  Natural gas and crude oil reserves and
the estimates of the present value of future net revenues therefrom, were
determined based on then current prices and costs. Since January 1, 2009, we
have not filed, nor were we required to file, any reports concerning our oil and
gas reserves with any federal authority or agency.





There are
numerous uncertainties inherent in estimating quantities of proved reserves and
estimates of reserve quantities and values must be viewed as being subject to
significant change as more data about the properties becomes
available.





The
following table sets forth our estimated proved reserves as of June 30,
2009.





Proved
      Reserves6/30/2009
            
            
            12/31/2008Developed
            
            
            Undeveloped
            
            
            Total
            
            
            Developed
            
            
            Undeveloped
            
            
            TotalCrude
      Oil & NGL (Bbls)North
      Dakota
            
            
            1,175,834
            
            
            
            595,610
            
            
            
            1,771,444
            
            
            
            880,286
            
            
            
            488,683
            
            
            
            1,368,969Cinco
      Terry
            
            
            459,412
            
            
            
            591,777
            
            
            
            1,051,189
            
            
            
            476,586
            
            
            
            476,383
            
            
            
            952,969Other
            
            
            32,290
            
            
            
            54,890
            
            
            
            87,180
            
            
            
            37,436
            
            
            
            49,879
            
            
            
            87,315Total
      Oil (Bbls)
            
            
            1,667,536
            
            
            
            1,242,277
            
            
            
            2,909,813
            
            
            
            1,394,308
            
            
            
            1,014,945
            
            
            
            2,409,253Natural
      Gas (Boe)North
      Dakota
            
            
            108,178
            
            
            
            -
            
            
            
            108,178
            
            
            
            85,143
            
            
            
            -
            
            
            
            85,143Cinco
      Terry
            
            
            313,591
            
            
            
            290,290
            
            
            
            603,881
            
            
            
            289,274
            
            
            
            235,809
            
            
            
            525,083Other
            
            
            52,650
            
            
            
            51,760
            
            
            
            104,410
            
            
            
            50,500
            
            
            
            48,100
            
            
            
            98,600Total
      Gas (Boe)
            
            
            474,419
            
            
            
            342,050
            
            
            
            816,469
            
            
            
            424,917
            
            
            
            283,909
            
            
            
            708,826Total
      Proved Reserves (Boe)
            
            
            2,141,955
            
            
            
            1,584,327
            
            
            
            3,726,282
            
            
            
            1,819,225
            
            
            
            1,298,854
            
            
            
            3,118,079





Plan
of Operations





Magnum
Hunter’s plan of operations is to capitalize on market opportunities to acquire
leveraged and underperforming producing assets. The Company intends to grow
its asset base with a focus on acquiring distressed assets, increasing the
percentage of operated assets, increasing exposure to resource plays and
unconventional areas and leveraging management’s operating experience. We plan
to continue further exploration and development of oil and natural gas prospects
that we currently own while concentrating on those with the lowest
development and lifting costs. Consistent with these plans is our restructuring
of staff within our company towards increased operations of oil and gas
properties in the U.S.





The
continued development of our properties and prospects and the pursuit of new
opportunities will require that we maintain access to adequate levels of
capital.   We strive for an optimal balance between our property
portfolio and our capital structure that allows for growth and benefit to our
shareholders.   The balancing of capital needs and property
holdings will be challenging during times of lower commodity prices, the access
to capital markets and the complex global economic picture.





The
business of oil and natural gas property acquisition, exploration and
development is capital intensive. The level of success attainable by an oil and
gas company is directly linked to and limited by the amount of available
capital. A principal part of our plan of operations is to raise the additional
capital to finance future acquisitions and the exploration and development of
our current oil and natural gas prospects and the acquisition of additional
properties.  As explained under “Financial Condition and Liquidity”
below, based on our present working capital, borrowings and borrowing available
under the credit facility and expected cash flow from operations, we believe we
have sufficient working capital to fund our operations and expected commitments
through at least September 30, 2010.





We intend
to use the services of independent consultants and contractors to perform
various professional services, including reservoir engineering, land, legal,
environmental, audit and tax services.  We believe that by limiting
our management and employee costs, we are able to better control overall
costs and retain flexibility in terms of project
management.




17


Financial
Condition and Liquidity





The
Company’s cash flow provided by operations before changes in working capital was
$1,021,262 for the nine months ended September 30, 2009, and $4,006,894 in the
prior comparable period, reflecting a decrease of $2,985,632. This decrease was
due primarily to decreased revenue as a result of significantly lower commodity
prices. Our cash used in investing activities increased to $10,518,245 at
September 30, 2009 from $6,826,715 at September 30, 2008. This was due to
proceeds from the sale of assets recorded in the period ending September 30,
2008.  Net cash provided by financing activity was $5,476,654 for the
nine months ended September 30, 2009 compared to a net outflow of $7,165,857 at
September 30, 2008. The Company redeemed its outstanding preferred stock in
2008, resulting in an outflow of funds totaling $7,966,735.





As of the
date of this report, we estimate our capital budget for fiscal 2009 to be
approximately $16.1 million of which, $10.7 million has been expended during the
first three quarters of 2009, including:





●
            Up
      to $4.7 million to be deployed for drilling in Cinco Terry of which $3.3
      million has been expended during the first three quarters of
      2009.


●
            Approximately
      $1.7 million for drilling and completion operations in the Surprise
      Prospect that has been expended during the first three quarters of
      2009.


●
            Approximately
      $1.6 million to be used for new drilling and salt water disposal
      facilities in the East Chalkley
Prospect.


●
            Approximately
      $4.1 million to drill new horizontal wells and maintain secondary recovery
      efforts in North Dakota of which $2.5 million has been committed to
      date.


●
            We
      estimate capital expenditures of approximately $1.1 million to be
      allocated in our South Texas (Eagle Ford Shale) area of operations
      recently added through the acquisition of Sharon
  Resources.


●
            We
      have budgeted $3.0 million to be used in connection with other prospect
      areas, the majority of which has been deployed in the first three
      quarters.





As of
September 30, 2009, we had total assets of $62,979,370 and working capital of
$3,279,163.  In addition, we had $27.0 million outstanding on our
credit facilities, of which $15.0 million was outstanding on the Second Lien
Term Loan Agreement and $12.0 million was outstanding on the Revolving Credit
Agreement. On October 23, 2009, the Company received a commitment letter from
Bank of Montreal to enter into a new senior credit facility.  The
facility is governed by a borrowing base with an initial advance rate of $25
million.  Proceeds from the Bank of Montreal credit facility will be
used to refinance the existing credit facilities. Based on our present working
capital position, current rate of cash flow from operations, and proceeds from
our $3.8 million equity issuance on November 5, 2009, we believe that we have
available to us sufficient working capital to fund our operations and expected
commitments for exploration and development through at least September 30,
2010.  However, in the event we receive calls for capital greater
than, or generate cash flow from operations less than we expect, we may require
additional working capital to fund our operations and expected commitments for
exploration and development prior to September 30,
2010.





We may
seek to obtain additional working capital through the sale of our securities
and, subject to the successful deployment of our cash on hand, we will endeavor
to obtain additional capital through bank lines of credit, private equity
investors, hedge funds and project financing.  However, we have no
history of generating significant cash from existing oil and gas
operations.  Further, as described below, under the terms of our
existing credit facilities, we are prohibited from incurring any additional
debt from third parties.  Our ability to obtain additional working
capital through bank lines of credit, private equity investors, hedge funds and
project financing may be subject to the repayment of our credit
facilities.  Consequently, there can be no assurance we will be able
to obtain continued access to capital as and when needed or, if so, that the
terms of any available financing will be subject to commercially reasonable
terms.  If we are unable to access additional capital in significant
amounts as needed, we may not be able to develop our current prospects and
properties, may have to forfeit our interest in certain prospects and may not
otherwise be able to develop our business. In such an event, our stock price may
be materially adversely affected.





On
November 10, 2009, the Company entered into definitive agreements with certain
institutional investors to sell 3,903,720 units, with each unit consisting of
one of the Company's common shares and a one fifth of a warrant to purchase one
common share, for gross proceeds of approximately $6.75 million, before
deducting placement agent fees and estimated offering expenses, in a "registered
direct" offering. The investors have agreed to purchase the units at a purchase
price of $1.73 per unit. The warrants, which represent the right to acquire an
aggregate of up to 780,744 common shares, will be exercisable at any time on or
after May 17, 2010 and prior to the 3-year anniversary of the closing of the
transaction at an exercise price of $2.50 per share, which was 132% of the
closing price of the Company's common shares on the NYSE AMEX on November 10,
2009.  The transaction is expected to close on November 16, 2009,
subject to customary closing conditions. Magnum Hunter intends to use the
proceeds from the offering to repay current borrowings under its revolving
credit facility, to pursue acquisition opportunities, and for other working
capital purposes.




18




On
November 11, 2009 the Company entered into definitive agreements with certain
institutional investors to sell an additional 2,500,000 units to investors that
participated in the $6.75 million offering, with each unit consisting of one of
the Company's common shares and a one fifth of a warrant to purchase one common
share, for gross proceeds of approximately $4.325 million, before deducting
placement agent fees and estimated offering expenses, in a "registered direct"
offering. The total amount raised in the "registered direct" offering amounts to
$11.078 million of gross proceeds before deducting placement agent fees and
estimated offering expenses. The investors have agreed to purchase the units at
a purchase price of $1.73 per unit. The warrants, which represent the right to
acquire an aggregate of up to 500,000 common shares, will be exercisable at any
time on or after May 17, 2010 and prior to the 3-year anniversary of the closing
of the transaction at an exercise price of $2.50 per share, which was 145% of
the closing price of the Company's common shares on the NYSE AMEX on November
11, 2009.  The transaction is expected to close on November 16, 2009,
subject to customary closing conditions. Magnum Hunter intends to use the
proceeds from the offering to repay current borrowings under its revolving
credit facility, to pursue acquisition opportunities, and for other working
capital purposes. The new equity capital raised in these offerings satisfies the
Company's minimum equity commitment required under the terms of the Asset
Purchase Agreement in connection with the acquisition of Triad Energy
Corporation and certain affiliates announced on October 29, 2009.





The
Company issued 187,482 shares of common stock in November, 2009 pursuant to the
At the Market sales agreement as disclosed in the S-3 filed October 14,
2009.





CIT
Credit Facility





On
September 9, 2008, we entered into a $50.0 million Credit Agreement (the "Credit
Agreement") with CIT Capital USA Inc. and a $15.0 million Second Lien Term
Loan Agreement (the "Second Lien Term Loan Agreement") with CIT Capital USA
Inc.





The
Credit Agreement provides for a $50.0 million first lien revolving credit
facility, with an initial borrowing base availability of $17.0 million. The
maturity date of the Credit Agreement is September 9, 2011. Borrowings under the
Credit Agreement bear interest, at our option, at either a fluctuating base rate
or a rate equal to LIBOR plus, in each case, a margin determined based on our
utilization of the borrowing base.





The
Credit Agreement was amended on March 19, 2009. The amended terms include the
adjustment of negative covenants, the addition of a LIBOR floor of 2.5%, a fifty
basis point increase to the margin and a reduction of the borrowing base to
$12.0 million from $17.0 million.





The
Second Lien Term Loan Agreement provides for a $15 million second lien term loan
facility. The maturity date of the Second Lien Term Loan Agreement is September
9, 2012. Borrowings under the Second Lien Term Loan Agreement bear interest, at
our option, at either a fluctuating base rate plus 6.50% per annum or a rate
equal to LIBOR plus 7.50% per annum.





PRC
Williston LLC, our subsidiary, has guaranteed the performance of all of our
obligations under the Credit Agreement, the Second Lien Term Loan Agreement and
related agreements pursuant to a Guaranty and Collateral Agreement and a Second
Lien Guaranty and Collateral Agreement each dated as of September 9, 2008.
Subject to certain permitted liens, our obligations have been secured by the
grant of a first priority lien on not less than 80% of the value of our and PRC
Williston's existing and to-be-acquired oil and gas properties and the grant of
a first priority security interest in related personal property of ours and PRC
Williston. We also granted a first priority security interest in our ownership
interest in PRC Williston, subject only to certain permitted liens.





As of
September 30, 2009, we had drawn $27 million on the CIT facility, of which $15.0
million was drawn on the Second Lien Term Loan Agreement and $12 million was
drawn on the Credit Agreement.  Subsequent to September 30, 2009 we
anticipate refinancing the CIT credit facilities in their entirety using the
proceeds from the Bank of Montreal credit facility.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet financing arrangements.





Glossary
of Oil and Natural Gas Terms





The
following is a description of the meanings of some of the oil and natural gas
industry terms used in this report.





bbl. Stock tank barrel, or 42
U.S. gallons liquid volume, used in this report in reference to crude oil or
other liquid hydrocarbons.





bcf. Billion cubic feet of
natural gas.





boe. Barrels of crude oil
equivalent, determined using the ratio of six mcf of natural gas to one bbl of
crude oil, condensate or natural gas liquids.





boe/d. boe per
day.





Completion. The process of
treating a drilled well followed by the installation of permanent equipment for
the production of natural gas or oil, or in the case of a dry hole, the
reporting of abandonment to the appropriate agency.




19




Condensate. Hydrocarbons
which are in the gaseous state under reservoir conditions and which become
liquid when temperature or pressure is reduced. A mixture of pentanes and higher
hydrocarbons.





Development well. A well
drilled within the proved area of a natural gas or oil reservoir to the depth of
a stratigraphic horizon known to be productive.





Drilling locations. Total
gross locations specifically quantified by management to be included in the
Company’s multi-year drilling activities on existing acreage. The Company’s
actual drilling activities may change depending on the availability of capital,
regulatory approvals, seasonal restrictions, oil and natural gas prices, costs,
drilling results and other factors.





Dry hole. A well found to be
incapable of producing either oil or gas in sufficient quantities to justify
completion as an oil or gas well.





Exploratory well. A well
drilled to find and produce natural gas or oil reserves not classified as
proved, to find a new reservoir in a field previously found to be productive of
natural gas or oil in another reservoir or to extend a known
reservoir.





Field. An area consisting of
either a single reservoir or multiple reservoirs, all grouped on or related to
the same individual geological structural feature and/or stratigraphic
condition.





Formation. An identifiable
layer of rocks named after its geographical location and dominant rock
type.





Lease. A legal contract that
specifies the terms of the business relationship between an energy company and a
landowner or mineral rights holder on a particular tract of land.





Leasehold. Mineral rights
leased in a certain area to form a project area.





mbbls. Thousand barrels of
crude oil or other liquid hydrocarbons.





mboe. Thousand barrels of
crude oil equivalent, determined using the ratio of six mcf of natural gas to
one bbl of crude oil, condensate or natural gas liquids





mcf. Thousand cubic feet of
natural gas.





mcfe. Thousand cubic feet
equivalent, determined using the ratio of six mcf of natural gas to one bbl of
crude oil, condensate or natural gas liquids.





mmbbls. Million barrels of
crude oil or other liquid hydrocarbons.





mmboe. Million barrels of
crude oil equivalent, determined using the ratio of six mcf of natural gas to
one bbl of crude oil, condensate or natural gas liquids.





mmbtu. Million British
Thermal Units.





mmcf. Million cubic feet of
natural gas.





Net acres, net wells, or net
reserves. The sum of the fractional working interest owned in gross
acres, gross wells, or gross reserves, as the case may be.





ngl. Natural gas liquids, or
liquid hydrocarbons found in association with natural gas.





Overriding royalty interest.
Is similar to a basic royalty interest except that it is created out of the
working interest. For example, an operator possesses a standard lease providing
for a basic royalty to the lessor or mineral rights owner of 1/8 of 8/8. This
then entitles the operator to retain 7/8 of the total oil and natural gas
produced. The 7/8 in this case is the 100% working interest the operator owns.
This operator may assign his working interest to another operator subject to a
retained 1/8 overriding royalty. This would then result in a basic royalty of
1/8, an overriding royalty of 1/8 and a working interest of 3/4. Overriding
royalty interest owners have no obligation or responsibility for developing and
operating the property. The only expenses borne by the overriding royalty owner
are a share of the production or severance taxes and sometimes costs incurred to
make the oil or gas salable.





Plugging and abandonment.
Refers to the sealing off of fluids in the strata penetrated by a well so that
the fluids from one stratum will not escape into another or to the surface.
Regulations of all states require plugging of abandoned wells.




20




Present value of future net revenues
(PV-10). The present value of estimated future revenues to be generated
from the production of proved reserves, before income taxes, of proved reserves
calculated in accordance with Financial Accounting Standards Board guidelines,
net of estimated production and future development costs, using prices and costs
as of the date of estimation without future escalation, without giving effect to
hedging activities, non-property related expenses such a general and
administrative expenses, debt service and depreciation, depletion and
amortization, and discounted using an annual discount rate of 10%.





PV-10. Pre–tax present value
of estimated future net revenues discounted at 10%.





Production. Natural
resources, such as oil or gas, taken out of the ground.





Proved oil and gas reserves.
Proved oil and gas reserves are the estimated quantities of crude oil, natural
gas and natural gas liquids which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions, i.e., prices and
costs as of the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual arrangements, but not on
escalations based upon future conditions.





(i)
              Reservoirs
      are considered proved if economic producibility is supported by either
      actual production or conclusive formation test. The area of a reservoir
      considered proved includes (A) that portion delineated by drilling and
      defined by gas-oil and/or oil-water contacts, if any; and (B) the
      immediately adjoining portions not yet drilled, but which can be
      reasonably judged as economically productive on the basis of available
      geological and engineering data. In the absence of information on fluid
      contacts, the lowest known structural occurrence of hydrocarbons controls
      the lower proved limit of the
reservoir.
  (ii)
              Reserves
      which can be produced economically through application of improved
      recovery techniques (such as fluid injection) are included in the "proved"
      classification when successful testing by a pilot project, or the
      operation of an installed program in the reservoir, provides support for
      the engineering analysis on which the project or program was
      based.
  (iii)
              Estimates
      of proved reserves do not include the following: (A) oil that may become
      available from known reservoirs but is classified separately as "indicated
      additional reserves"; (B) crude oil, natural gas, and natural gas liquids,
      the recovery of which is subject to reasonable doubt because of
      uncertainty as to geology, reservoir characteristics, or economic factors;
      C) crude oil, natural gas, and natural gas liquids, that may occur in
      undrilled prospects; and (D) crude oil, natural gas, and natural gas
      liquids, that may be recovered from oil shales, coal, gilscnite , and
      other such sources.





Proved developed oil and gas
reserves.Proved developed oil and gas reserves are reserves that can be
expected to be recovered through existing wells with existing equipment and
operating methods. Additional oil and gas expected to be obtained through the
application of fluid injection or other improved recovery techniques for
supplementing the natural forces and mechanisms of primary recovery should be
included as "proved developed reserves" only after testing by a pilot project or
after the operation of an installed program has confirmed through production
response that increased recovery will be achieved.





Proved undeveloped reserves.
Proved undeveloped oil and gas reserves are reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion. Reserves on undrilled
acreage shall be limited to those drilling units offsetting productive units
that are reasonably certain of production when drilled. Proved reserves for
other undrilled units can be claimed only where it can be demonstrated with
certainty that there is continuity of production from the existing productive
formation. Under no circumstances should estimates for proved undeveloped
reserves he attributable to any acreage for which an application of fluid
injection or other improved recovery technique is contemplated, unless such
techniques have been proved effective by actual tests in the area and in the
same reservoir.





Probable Reserves. Probable
reserves are those additional reserves which analysis of geoscience and
engineering data indicate are less likely to be recovered than proved reserves
but more certain to be recovered than possible reserves. It is equally likely
that actual remaining quantities recovered will be greater than or less than the
sum of the estimated proved plus probable reserves (2P). In this context, when
probabilistic methods are used, there should be at least a 50-percent
probability that the actual quantities recovered will equal or exceed the 2P
estimate.





Possible Reserves. Possible
reserves are those additional reserves which analysis of geoscience and
engineering data suggest are less likely to be recoverable than probable
reserves. The total quantities ultimately recovered from the project have a low
probability to exceed the sum of proved plus probable plus possible reserves
(3P), which is equivalent to the high estimate scenario. In this context, when
probabilistic methods are used, there should be at least a 10-percent
probability that the actual quantities recovered will equal or exceed the 3P
estimate.





Productive well. A well that
is found to be capable of producing either oil or gas in sufficient quantities
to justify completion as an oil or gas well.





21




Project. A targeted
development area where it is probable that commercial gas can be produced from
new wells.





Prospect. A specific
geographic area which, based on supporting geological, geophysical or other data
and also preliminary economic analysis using reasonably anticipated prices and
costs, is deemed to have potential for the discovery of commercial
hydrocarbons.





Recompletion. The process of
re-entering an existing well bore that is either producing or not producing and
completing new reservoirs in an attempt to establish or increase existing
production.





Reserves. Oil, natural gas
and gas liquids thought to be accumulated in known reservoirs.





Reservoir. A porous and
permeable underground formation containing a natural accumulation of producible
nature gas and/or oil that is confined by impermeable rock or water barriers and
is separate from other reservoirs.





Secondary Recovery. A
recovery process that uses mechanisms other than the natural pressure of the
reservoir, such as gas injection or water flooding, to produce residual oil and
natural gas remaining after the primary recovery phase.





Shut-in. A well that has been
capped (having the valves locked shut) for an undetermined amount of time. This
could be for additional testing, could be to wait for pipeline or processing
facility, or a number of other reasons.





Standardized measure. The
present value of estimated future cash inflows from proved oil and natural gas
reserves, less future development, abandonment, production and income tax
expenses, discounted at 10% per annum to reflect timing of future cash flows and
using the same pricing assumptions as were used to calculate PV-10. Standardized
measure differs from PV-10 because standardized measure includes the effect of
future income taxes.





Successful. A well is
determined to be successful if it is producing oil or natural gas, or awaiting
hookup, but not abandoned or plugged.





Undeveloped acreage. Lease
acreage on which wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil and natural gas regardless
of whether such acreage contains proved reserves.





Water flood. A method of
secondary recovery in which water is injected into the reservoir formation to
displace residual oil and enhance hydrocarbon recovery.





Working interest. The
operating interest that gives the owner the right to drill, produce and conduct
operating activities on the property and receive a share of production and
requires the owner to pay a share of the costs of drilling and production
operations.




ITEM 3.
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET
RISK.





Not
applicable.





ITEM 4(T).
            CONTROLS
      AND PROCEDURES





Our
Chairman and Chief Financial Officer have reviewed and continue to evaluate the
effectiveness of our controls and procedures over financial reporting and
disclosure (as defined in the Securities Exchange Act of 1934 (“Exchange Act”)
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
quarterly report. The term “disclosure controls and procedures” is defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This term refers to the
controls and procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified by the Securities and Exchange Commission’s rules and
forms, and that such information is accumulated and communicated to our
management, including our chairman and chief financial officer, as appropriate,
to allow timely decisions regarding required disclosures. In designing and
evaluating our controls and procedures over financial reporting and disclosure,
our management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives and our management necessarily is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures.





An
evaluation was performed under the supervision and with the participation of our
management, including our chairman and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of September 30, 2009. Based on that evaluation, our management,
including our chairman and chief financial officer, has concluded that our
disclosure controls and procedures were effective as of September 30,
2009.





Changes in Internal Control.
We made no changes to our internal control over financial reporting during the
quarter ended September 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.





22





PART
II.  OTHER INFORMATION








ITEM 6.
            EXHIBITS





Exhibit
              No.
            Description
            Method
      of Filing31.1
            Certification
      of Chairman Pursuant to Rule 13a-14(a) of the Securities Exchange Act of
      1934
            Filed herewith31.2
            Certification
      of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities
      Exchange Act of 1934
            Filed
      herewith32
            Certification
      of Chairman and Chief Financial Officer Pursuant to 18 U.S.C. Section
      1350
            Filed
      herewith











23





SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereto duly
authorized.





MAGNUM
      HUNTER RESOURCES CORPORATIONDate:
      November 16, 2009
            
            /s/ Gary
      C. EvansGary
      C. Evans,Chairman







Date:
      November 16, 2009
            
            /s/ Ronald
      D. OrmandRonald
      D. Ormand,Chief
      Financial Officer














24