Five months after it voluntarily filed for Chapter 11 protection, Magnum Hunter Resources Corp. has emerged from bankruptcy with new leadership after having ousting the former CEO and founder Gary Evans.
The U.S. Bankruptcy Court for the District of Delaware approved the reorganization plan last month, allowing it to wipe out $1 billion of debt and convert its debtor-in-possession financing into equity under an agreement with lenders (see Shale Daily, April 21). Creditors provided the company with $200 million so it could continue to meet its vendor, employee and other stakeholder obligations during the bankruptcy. The restructuring plan allowed the company to clear its debt and convert the financing into equity.
Magnum said its board is "actively engaged" in a search for a permanent CEO, making no mention of Evans, who founded the original Magnum Hunter Resources Inc. in 1985, and was serving as chief of the successor company when it went bankrupt. Evans sold the original Magnum to Cimarex Energy Co. in 2005 (see Daily GPI, June 7, 2005). He was later named chairman and CEO of Houston-based Petro Resources Corp., which was renamed Magnum Hunter Resources Corp. in 2009 after Evans retained the rights to the name in the Cimarex sale (see Daily GPI, July 16, 2009).
Magnum said in an update this week that CFO Joseph Daches and Senior Vice President of Business Development Rick Farrell would serve as co-CEOs until a new chief is named. Meanwhile, Evans has started up Energy Hunter Resources Inc. and is in the process of buying land in the Permian Basin and Eagle Ford Shale.
Steep financial losses, dwindling cash flow and growing debt that were exacerbated by the commodities downturn forced Magnum to declare bankruptcy last December (see Shale Daily, Dec. 15, 2015). In recent years, it has sold assets in Texas, North Dakota and Canada to build up a core in the Appalachian Basin.
In the months leading up to the bankruptcy filing, Magnum promised but failed to deliver on a Utica Shale joint venture, the sale of its 45% stake in the Eureka Hunter Pipeline -- a premiere asset in its portfolio -- and other liquidity enhancing events such as having a third party assume some of its transportation liabilities to free up more credit. Eureka consists of 175 miles of 20-inch diameter wet and dry natural gas gathering lines that span five counties in West Virginia and three counties in Ohio.
Prior to Evans departure and the bankruptcy filing, the executive ranks were shuffled several times. In announcing its emergence from bankruptcy, Magnum said it had successfully reached "a resolution of all claims and controversies with Eureka Midstream Holdings LLC," adding that "the company and Eureka will move forward with a stronger relationship post-emergence."
That was a key aspect of the bankruptcy proceedings, some of the company's midstream holdings and contracts were a bone-of-contention heading into the restructuring. Morgan Stanley Infrastructure Inc. owns most the rest of the system, and Magnum has valued it at more than $1 billion in the recent past (see Shale Daily, June 25, 2015; Sept. 16, 2014).