Magnum Hunter Resources, an Irving-based oil and gas explorer once heady with spending amid the U.S. shale boom, filed for bankruptcy in Delaware as its heavy debt load was exacerbated by the glut in cheap energy.
The company said Tuesday that it has the support of a majority of its lenders for a turnaround plan. Holders of 75 percent of the company’s debt have agreed to support the restructuring, which calls for a $200 million loan to keep Magnum Hunter operating in Chapter 11 bankruptcy, according to a statement.
The loan will convert to equity in a new, reorganized company in a process that Chief Executive Officer Gary C. Evans said will be efficient and cost-effective.
“This restructuring will position Magnum Hunter as a market leader in the upstream sector with an ideal capital structure to capitalize on the large number of opportunities anticipated in our industry due to the precipitous commodity cycle downturn,” Evans said in the statement.
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A bankruptcy judge would still need to approve any plan.
The filing comes as natural gas fell to a 14-year low on Monday amid record-breaking December warmth in the eastern U.S. Magnum Hunter blamed the slump, plus its own “substantial debt,” for the bankruptcy. The company had stopped drilling in its two main locations — the Marcellus Shale and the Utica Shale — at the start of this year due to the price drop.
Magnum is the latest in a string of energy firms that have succumbed to financial troubles, including Fort Worth-based producers Quicksilver Resources and Energy & Exploration Partners.
Last year, Magnum Hunter relocated its corporate headquarters from Houston to Las Colinas, and said it would move about 50 employees from Grapevine to the Irving site. The move came after Magnum Hunter sold its assets in the Eagle Ford Shale field in south Texas.
Magnum listed debts of more than $1.1 billion in its filing. Among the biggest claims unsecured by collateral are notes due in 2020, listed in court papers at $634.6 million.
Marcellus and Utica assets, as well as properties in Kentucky, accounted for 96 percent of Magnum’s total proved reserves. The Williston Basin in North Dakota and Saskatchewan accounted for the rest, as of June 30, the company has said.
Magnum tried several options to stave off bankruptcy. It tried to raise cash by selling its stake in the Eureka Hunter pipeline business. A sale would generate $460 million to $600 million, the company said in an Aug. 7 report. Morgan Stanley’s infrastructure arm owns the rest of Eureka, which carries gas between Ohio and West Virginia, according to Magnum’s annual report.
Eureka Hunter Holdings and its units aren’t part of the Chapter 11 case.
This article includes material from Star-Telegram archives.