Magnum Hunter ResourcesCorp., once a contender to become a leading Appalachian shale naturalgas driller, emerged from bankruptcy protection May 9 minus its CEO and with humblerplans for the future.
Company founder and now-former CEO Gary Evans turned in his resignationMay 6, according to filings with the SEC. Evans led the small producer to a $1.4billion market cap in 2013 by borrowing heavily to drill in the Marcellus and Uticashales in West Virginia and Ohio while financing the Eureka Hunter Pipeline LLC that gathered and processed itsproduction. The company said May 9 it was searching for a replacement CEO.
During the bankruptcy protection process, Magnum Hunter restructuredseveral natural gas gathering and transportation agreements.
Magnum Hunter initially sought to reject a midstream contract with Eureka Hunter that wouldhave cost it $68 million over the next decade for currently unused services in WestVirginia. The two parties settled by restructuring Magnum Hunter's gas gatheringservices agreement to extend the contract and increase the fees for the servicesit is using, and reducing the minimum volume commitments on the agreements it isnot yet using. Eureka Hunter estimatedthat it was taking a $24 million haircut in lost revenue over time.
Magnum Hunter also worked with interstate pipelines to adjustits firm contracts. Magnum Hunter reached an agreement to release 100,000 MMcf/dof firm transportation on Texas GasTransmission LLC for a $15 million claim, and adjusted its firm transportationrights with Rockies Express PipelineLLC.
Executives at Tallgrass Energy, whose private partnership operatesREX, said on an April 28 earningscall that they were confident they'd resell that capacity.
"The Magnum Hunter [50 MMcf/d] that's coming back to ushas value," Tallgrass EnergyPartners LP COO William Moler told analysts. "We expect Marcellusand Utica gas production to continue to be voluminous, and we're going to be thereto do something about it at the right time."
The new Magnum Hunter emerged from bankruptcy protection worth$900 million, the company said, after eliminating $1 billion in debt, owed mostlyto a consortium of banks underwritten by Citigroup Inc., Deutsche Bank SecuritiesInc., BMO Capital Markets Corp. and Credit Suisse Securities (USA) LLC. Second lienterm lenders received 36.87% of equity in the new company, while senior note holders,often the same lenders, received 31.33% of new equity. Debtor-in-possession lendersreceived 28.8% of the new equity. The remaining 3% of equity is slated to go togeneral unsecured creditors while a cash pool of $23 million will go to pay vendors,lawyers and taxes, the company said in regulatory filings.
Evans and other shareholders, including energy investment bankTudor Pickering Holt & Co. LLC's TPH Asset Management LLC, which held a 3% stakein Magnum Hunter, according to S&P Global Market Intelligence data, were wipedout.
Going forward, Magnum Hunter's strategy will be to focus onlyon operated wells in the 221.7 Bcfe of 97% natural gas reserves it holds in theMarcellus and Utica Shales, the company said in its annual report filed May 6. Itdid not disclose when it intends to resume drilling but said its operations willstill depend on new debt and its current cash flows to continue operating.