Magnum Hunter eyes sale of ownership interest sale to enhance liquidity, scales back cap ex in Q2

By Lisa Kerner

Charlotte, N.C., Aug. 7 – Magnum Hunter Resources Corp. said it completed a number of “liquidity events” during the second quarter to enhance its liquidity through year.

On June 18, the company closed on the sale of certain non-core undeveloped and unproven leasehold acreage located in Tyler County, W.V., to an independent oil and gas exploration company for about $33.6 million in cash.

Also in June, Magnum announced it intended to pursue the sale of 100% of its equity ownership interest in Eureka Hunter Holdings, LLC. A sale is expected to generate between $460 million and $600 million in cash, according to the company’s second-quarter news release.

The Dallas-based independent oil and gas exploration and production company is also negotiating a joint venture deal for cash and funding for future capital expenditures of roughly $450 million.

Magnum maintains a shelf registration statement on form S-3 that was declared effective by the Securities and Exchange Commission on April 22. The company has raised $31.1 million in net proceeds from the issuance of common stock, as of Aug. 6.

As of June 30, Magnum had total liquidity of $14.9 million, including $8.8 million of cash on hand and $6.8 million of availability under its revolving credit facility, said chief financial officer Joe Daches during the company’s earnings conference call on Friday.

Subsequent to quarter end, on July 10 the company amended its revolving credit facility, extending payables outstanding to 180 days, from 90 days, and removing the condition that Magnum raise $65 million in net proceeds from specified liquidity transactions, Daches said.

Magnum previously announced it would “shut off” all unnecessary capital expenditures at Jan. 1, said chairman and chief executive officer Gary C. Evans on the call.

The company’s upstream capital expenditure budget for fiscal year 2015 is $100 million. This budget may be reduced or increased depending on realized prices for its natural gas, NGLs and oil, investment opportunities, continued effective implementation of cost reduction initiatives, including reduction of oil and gas field service costs, and funding allocations, the release stated.

Magnum allocated a majority of the budget, or about $70 million, to its Marcellus Shale and Utica Shale exploration and development drilling program in West Virginia and Ohio.

Second-quarter capital expenditures totaled $13 million.

The company believes its internally generated cash flows and additional liquidity sources, including proceeds from non-core asset sales and potential capital markets transactions, will be sufficient to fund the fiscal 2015 cap ex budget.

While oil and gas production was up 20% for the quarter, oil and gas revenues were down 60% year over year at $33.4 million.

Magnum had a second-quarter net loss of $30.5 million, or a loss of $0.15 per basic and diluted share. This compares to a net loss of $80 million, or a loss of $0.43 per basic and diluted share, for the prior-year period.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.