I'm no expert in understanding their asset's available for sale. How much will they get for Eureka Hunter Holdings?
I do know they sold around 20 mil shares of stock for 30 mil in June and yet their cash position decreased by $50 mil in the past 6 month.
They've suspended drilling so their revenues are going to fall off.
They need a significant rebound in oil and gas prices which frankly isn't in the cards.
BTW I don't have a dog in this fight, just looking around at commodity producers to find ones that represent value and have the financial strength and level of operational efficiency to survive the current deflationary trend to the next upswing.
Good luck
mad2
From MHR's 10Q dated Aug 7th
Second Quarter 2015 Financial Highlights
? Oil and natural gas revenues from continuing operations decreased by 60.1% to $33.4 million compared to $83.8 million during the same three-month period in 2014, due to declines in commodity prices between the comparable periods.
? We reported a net loss from continuing operations of $20.1 million for the three months ended June 30, 2015, compared to net loss from continuing operations of $17.7 million for the three months ended June 30, 2014. Total operating expenses were $35.0 million for the three months ended June 30, 2015, an $89.8 million decrease from the three months ended June 30, 2014. The decrease in operating expense was primarily due to a $26.7 million gain on the sale of certain undeveloped and unproven leasehold acreage in Tyler County, West Virginia and a $38.4 million decrease in midstream natural gas gathering, processing and marketing expenses due to the decision made by a third party customer to market its own natural gas.
? On May 7, 2015, we terminated the majority of our open commodity derivative positions and received approximately $11.8 million in cash proceeds.
? On June 18, 2015, we closed on the sale of our interests in certain undeveloped and unproved leasehold acreage located in West Virginia for cash consideration of approximately $33.6 million.
? In June 2015, we adopted a plan to divest of our entire equity ownership interest in Eureka Hunter Holdings in order to improve our liquidity position. Based on early indications of interest, we believe that we could complete the divestiture within the next 60 to 90 days.
? Through June 30, 2015, we sold 11,441,596 shares of our common stock for net proceeds of $21.8 million pursuant to an At-the-Market ("ATM") offering.
? Our general and administrative expenses decreased over $7.5 million, or 40.0% for the three month period ended June 30, 2015 as compared to the three months ended June 30, 2014. We reduced our general and administrative expenses by reducing legal costs, reducing our reliance on outside consultants and temporary staffing, and closing our offices in Denver, Colorado and Calgary, Alberta, among other measures.
Liquidity and Capital Resources
We have historically relied on borrowings under our credit facilities, proceeds from sales of assets, including liquidation of derivative positions, and proceeds from the sale of securities in the capital markets to meet our liquidity needs. Due to the precipitous decline in oil, natural gas, and NGLs prices, we have taken steps to assess our core assets and dramatically reduce our capital expenditures. In June 2015, we announced our plan to divest of our entire ownership interest in Eureka Hunter Holdings. Based on early indications of interest from third parties, we believe that we could complete the divestiture within the next 60 to 90 days and expect to realize proceeds of $460 to $600 million. Our ability to fund planned capital expenditures, to make acquisitions, fund our operations and comply with our debt covenants depends upon the divestiture of our approximate 45.53% ownership interest in Eureka Hunter Holdings, sales of other assets, our future operating performance, which is dependent upon commodity prices, availability of borrowings under our credit facilities, and, to a lesser extent, on our ability to access the capital markets, all of which are affected by prevailing economic conditions in our industry and financial, business and other factors, some of which are beyond our control. We cannot predict whether our planned divestiture of our entire interest in Eureka Hunter Holdings will be successful at the indicated amounts or whether additional liquidity from equity or debt financings beyond our credit facilities will be available, or available on acceptable terms, or at all, in the foreseeable future.
While we believe that our capital resources from the planned divestiture of our entire equity ownership interest in Eureka Hunter Holdings, existing cash balances, anticipated cash flow from operating activities, available borrowing capacity under the credit facility, proceeds from future sales of assets and proceeds from capital market transactions, will be adequate to execute our corporate strategies and to meet debt service obligations in 2015, there are certain risks and uncertainties that could negatively impact our results of operations and financial condition. Reductions in our borrowing capacity as a result of a redetermination of our borrowing base could have an adverse impact on our capital resources and liquidity. Although the Company is no longer exposed to significant reductions in our borrowing capacity from redeterminations of our borrowing base, we are constrained on the amount of additional borrowing that the Company may incur. Sustained declines in prices for commodities may also put downward pressure on cash provided from our operations.
Factors that will affect our liquidity in 2015 include expected increases in production and operating cash flows associated with certain new and previously completed wells, which had been shut-in for a substantial portion of 2014 and 2015 due to pad drilling. As of June 30, 2015, all of these wells are currently producing. While the Company is currently evaluating the monetization of certain of our assets, market factors, including further declines in the prices of oil and natural gas, may result in postponement of such asset sales.
Debt covenant compliance
As of June 30, 2015, the outstanding principal amount of our debt, gross of unamortized discounts, was $961 million, of which $9.9 million becomes due in the next twelve months, and we had a working capital deficiency of $101.6 million. Our failure to service any debt or to comply with the applicable debt covenants could result in a default under the related debt agreement, and under any other debt agreement or any commodity derivative contract under which such default is a cross-default, which could result in the acceleration of the payment of such debt, termination of the lenders' commitments to make further loans to us, loss of our ownership interests in the secured properties, early termination of the commodity derivative contract (and an early termination payment obligation) and/or otherwise materially adversely affect our business, financial condition and results of operations.
As more fully discussed in "Amendments to MHR Senior Revolving Credit Facility", on and effective as of July 10, 2015, the Company entered into an amendment to its credit agreement and limited waiver to our revolving credit facility, which among other things (i) extends the amount of time the Company may have payables outstanding after the date of invoice from 90 days to 180 days for any day on or prior to the earlier of (a) December 31, 2015 or (b) the date that is ten business days following the date on which the Company consummates the sale of all or substantially all of the Company's equity ownership interest in Eureka Hunter Holdings (the date of such sale, the "Trigger Date"), after which earlier date the restriction will revert back to 90 days, and (ii) provides a limited waiver to the current ratio and secured net debt to EBITDAX ratio for the June 30, 2015 compliance period under our revolving credit facility and for each fiscal quarter ending thereafter until the earlier of (i) the fiscal quarter ending December 31, 2015 or (ii) the fiscal quarter in which the Trigger Date occurs. Additionally, the amendment and limited waiver under the revolving credit facility permanently removed the Company's obligation to raise at least $65 million in aggregate net cash proceeds from specified liquidity transactions, which was an obligation imposed on us in an earlier amendment to our revolving credit facility. If we had not entered into this amendment and waiver, we would not have been in compliance with the current ratio or secured net debt to EBITDAX financial ratio set forth under our revolving credit facility, as amended, which required that the Company have a current ratio of not less than 1.0 to 1.0 as of that date and a secured net debt to EBITDAX ratio of not more than 2.5 to 1.0 for the June 30, 2015 compliance period.
This amendment and waiver provides the Company additional time and flexibility under our debt agreements to pursue and complete the liquidity enhancing transactions described below. We believe that these waivers and amendments as well as the successful execution of certain contemplated transactions will enable us to maintain compliance with such ratios for the next twelve months.
On July 27, 2015, we became aware of a technical default under our revolving credit facility, as amended, and our second lien term loan, as amended. In accordance with the terms of the revolving credit facility, as amended, we may not have accounts payable outstanding in excess of 180 days from the invoice date for any day on or prior to the earlier of (a) December 31, 2015 or (b) the date that is ten business days following the Trigger Date, after which earlier date the restriction will revert back to 90 days. In accordance with the terms of the second lien term loan, as amended, we may not have accounts payable outstanding in excess of 180 days from the invoice date. As of August 7, 2015, we had approximately $8.8 million in accounts payable, in excess of permissible amounts provided for in the Credit Agreement, which were outstanding in excess of 180 days from the invoice date. We have 30 days to cure this technical default and expect to cure the technical default within the 30 day deadline, on or before August 26, 2015. Between July 27, 2015 and August 7, 2015, we realized net proceeds of $6.0 million from the sale of shares of our common stock through an ATM program, which proceeds were used to reduce the amount of accounts payable outstanding in excess of 180 days from the invoice date, as well as proceeds from the final settlement of the sale of unproved, undeveloped leasehold acreage to Antero and cash on hand. We plan to continue utilizing proceeds from non-core asset sales and a limited amount of ATM offerings of our equity securities to cure the technical default and to maintain these minimum credit requirements in the future.
Other liquidity enhancing potential transactions
In addition to the recently announced plan to divest of our entire equity ownership interest in Eureka Hunter Holdings, we continue to actively pursue each of the following transactions described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2014 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015:
i. Entering into a joint venture under which we would contribute a portion of our Utica Shale undeveloped leasehold acreage in Ohio to further develop our leasehold position while being funded by our joint venture partner and providing additional working capital.
ii. Entering into certain asset management agreements for the marketing by a third party of certain of our natural gas production whereby the third party also agrees to provide credit support to certain interstate pipeline companies in replacement of our firm transportation letters of credit, resulting in the cancellation of the letters of credit and a corresponding increase in borrowing capacity under the revolving credit facility;
iii. Selling approximately 27,000 net non-core unproved leasehold acres, which are non-contiguous and consists of four distinct areas, located in West Virginia and Ohio; and
iv. Issuing common stock through ATM offerings or otherwise.
The Company believes that such transactions, if completed, could provide additional liquidity or enhance the value of our assets with minimal required capital. We cannot provide assurance as to whether or when we will be able to consummate these or other liquidity enhancing transactions, or, if any liquidity enhancing transactions are consummated, whether they will be on the terms contemplated or will provide us with sufficient liquidity to meet our cash flow needs, maintain compliance with the financial covenants in our debt agreements or satisfy the waivers set forth in the amendments and waivers to our revolving credit facility as described above.
We have an interest payment due on November 15, 2015 on our Senior Notes, which have an aggregate principal balance outstanding of $600 million as of June 30, 2015. Interest on the Senior Notes accrues at an annual rate of 9.75% and is payable semi-annually on May 15 and November 15. We expect that the total interest payment due on November 15, 2015 will be approximately $30 million, of which we had accrued $7.5 million as of June 30, 2015.
On March 13, 2015 we filed a universal shelf Form S-3 Registration Statement, which was declared effective on April 22, 2015, to enable us to issue securities from time to time, including issuances of common stock in ATM offerings. Based on the current market price of our common stock and the amount of available authorized but unissued shares of our common stock, the proceeds from potential ATM offerings could provide substantial additional liquidity. As of June 30, 2015, the Company has sold an aggregate of 11,441,596 shares of its common stock and received aggregate proceeds of $21.8 million net of sales commissions and other fees of $0.6 million through its ATM offering under this Form S-3 Registration Statement. Subsequent to June 30, 2015, we sold an additional 7,720,495 shares of common stock for proceeds of $9.3 million net of sales commissions of $0.2 million.
We define liquidity as funds available under our senior revolving credit facility plus cash and cash equivalents, excluding amounts held by our subsidiaries that are unrestricted subsidiaries under our senior revolving credit facility. The following table summarizes our liquidity position at June 30, 2015 compared to December 31, 2014:
June 30, 2015 December 31, 2014
(in thousands)
Borrowing base under MHR Senior Revolving Credit Facility $ 50,000 $ 50,000
Cash and cash equivalents 8,818 53,180
Borrowings under MHR Senior Revolving Credit Facility (5,000 ) -
Letters of credit issued (38,961 ) (39,261 )
Liquidity $ 14,857 $ 63,919 |
