Magnum Hunter Emerges From Bankruptcy Sans CEO

Less than five months after voluntarily filing for bankruptcy protection, another E&P has returned from Chapter 11—but missing its CEO.

Magnum Hunter Resources Corp. said May 9 it has successfully completed its reorganization agreement with lenders to convert debt to equity and emerge from bankruptcy with a deleveraged balance sheet.

However, the Irving, Texas-based company still faces a tough path before it.

Among the company’s challenges, Gary C. Evans, Magnum Hunter's chairman and CEO, is no longer at the head of the company.

Magnum Hunter filed for Chapter 11 bankruptcy protection in December. At the time, Evans said the company’s restructuring would be efficient, cost effective and quick and that its plan is supported by its lenders.

“We also anticipate emerging from bankruptcy financially stronger than ever before,” he said.

Evans, however, is no longer serving as Magnum Hunter's chief executive.

After serving as chairman and CEO of Magnum Hunter since 2009, Evans has left the company to launch a new oil and gas venture named Energy Hunter Resources, Anthony Andora, a representative for Evans, told Hart Energy. Magnum Hunter declined to comment.

Magnum Hunter's new board of directors is currently actively engaged in a search for a permanent CEO following the company's reorganization, the release said. In the interim, Joseph C. Daches, CFO, and Rick S. Farrell, senior vice president of business development and land, will serve as co-CEOs of the company.

Previously, Evans founded and served as chairman and CEO of Magnum Hunter Resources Inc. for 20 years before selling the company to Cimarex Energy Co. (NYSE: XEC) for about $2.2 billion in 2005.

Reorganization

As part of Magnum Hunter's balance-sheet restructuring agreement, the company substantially deleveraged all of its $1 billion pre-bankruptcy funded debt. The agreement included the 100% conversion of its post-filing debtor-in-possession (DIP) financing into equity.

The DIP financing was executed through a $200 million senior secured multi-draw term loan backstopped by lenders who are parties to the restructuring support agreement.

Additionally, Magnum Hunter has reached a resolution of all claims and controversies with its midstream subsidiary, Eureka Midstream Holdings LLC, and certain of its affiliates. Magnum and Eureka will move forward with a "stronger relationship post-emergence," the release said.

In September 2014, Magnum Hunter said it entered an agreement to sell a stake in its Eureka Hunter, which owns a gathering system in the Marcellus and Utica shales in Ohio and West Virginia.

In the agreement, an affiliate of Morgan Stanley Infrastructure Inc. bought a 6.5% equity interest in Eureka Hunter from Magnum Hunter for $65 million. Morgan Stanley also purchased ArcLight Capital Partners LLC's 41% stake in Eureka for an undisclosed amount in a separate deal.

Morgan Stanley holds 47.5% interest in Eureka. Magnum Hunter holds a 44.5% interest in its midstream subsidiary, which the company has explored ways to monetize.

Magnum Hunter's restructuring had minimal disruption to its employees, vendors and operations, according to the press release. The company is primarily focused on natural gas production in the Appalachian Basin.

The company was represented by Kirkland & Ellis as restructuring counsel and PJT Partners as investment banker. Alvarez & Marsal North America was its financial adviser.

Emily Moser can be reached at emoser@hartenergy.com.

RELATED:

Hammered By Commodity Prices, Appalachian E&P Magnum Hunter Files Bankruptcy

Swift Energy Trades Equity For Second Chance, Release From Bankruptcy