Independent oil and gas producer Magnum Hunter Resources (MHR), which has stopped paying dividends, is selling assets and has hired advisors to boost its sinking financial position, may be out of options.
As part of its quarterly results filing with the U.S. Securities and Exchange Commission, the Irving, Texas-based company warned its only path could be Chapter 11.
Like many of its brethren, Magnum Hunter is between the proverbial rock – the demand for capital to conduct its operations – and the hard place – the economic realities of collapsed oil and gas prices.
“As of Sept. 30, 2015, the company had $6.5 million in cash and a working capital deficit of $1,037.2 million [$1.04 billion], “the SEC filing states.
At Sept. 30, Magnum Hunter was in default under its senior revolving credit facility and second-lien credit agreement.
During the first quarter, Magnum Hunter suspended all drilling and said it didn’t expect to resume until its liquidity position has been stabilized.
The New York Stock Exchange said Tuesday it would begin delisting the common stock of Magnum Hunter due to “abnormally low” price levels.
“They have become a victim of the weak commodity prices in Appalachia,” Gabriele Sorbara, vice president, E&P at Topeka Capital Markets tells Kallanish Energy.
Topeka dropped coverage of Magnum Hunter, effective Nov. 10, after the company released its third-quarter 10-Q, the NYSE delisting its shares, “and given the continued uncertainty surrounding management’s ability to execute on its liquidity initiatives, mainly the sale of its Eureka Hunter Midstream assets … .” according to Topeka.
“Although the company has taken proactive measures … , including entering into such forbearance agreements, these factors raise substantial doubt about the company’s ability to continue as a going concern,” Magnum Hunter said in its 10-Q.
Options for the company, according to the SEC filing: “liquidity-enhancing transactions the company has commenced previously, as well as restructuring some or all of the company’s debt and preferred equity to preserve cash flow, which may include seeking private restructuring or reorganization under Chapter 11 of the U.S. Bankruptcy Code.”
Magnum Hunter has operations in the Marcellus Shale in West Virginia and Ohio, the Utica Shale in southeastern Ohio and western West Virginia.
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