Dire Straits: Magnum Hunter Tells SEC Heading for Bankruptcy

mhrHere’s one time when we wish we had been wrong. In October we warned you that Magnum Hunter Resources (MHR), a smaller but important driller in the Marcellus/Utica, was either heading for a sale or bankruptcy (see Magnum Hunter: Preparing to Sell, or Filing for Bankruptcy?). Looks like it’s the later. The company filed its required quarterly form 10-Q with the Securities and Exchange Commission earlier this week (full copy of the 10-Q below). In the filing we get this statement: “As of September 30, 2015, the Company had $6.5 million in cash and a working capital deficit of $1,037.2 million, and the Company continues to incur significant losses from continuing operations.” Eeeks. They only have $6.5M in the bank to keep the lights on and make payroll, and they owe over $1 billion. Then we get this: “…these factors raise substantial doubt about the Company’s ability to continue as a going concern.” Near the end of the report, they spell it out in black and white: “We may seek the protection of the United States Bankruptcy Court (the “Bankruptcy Court”), which may harm our business and place equity holders at significant risk of losing all of their interests in the Company.” Translation: We’re going bankrupt. In addition, earlier this week the New York Stock Exchange made good on its previous threat and has begun the process of de-listing MHR’s stock–which caused a selloff of the stock. The stock price hit 15 cents per share, so the NYSE halted trading. Never rains but it pours…
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Marathon Increases Cash Dowry for MarkWest Buyout by 63%

It was only four months ago that Marathon Petroleum (headquartered in Ohio, fourth largest refiner in the U.S.) announced a deal to buy MarkWest Energy, arguably the premier Marcellus/Utica midstream company (see Midstream Bombshell: MarkWest Sells Itself to Marathon Petroleum). It certainly seemed like the two were on the way to consummating the marriage by the end of this year (see Marathon 3Q15: Closing on MarkWest Merger “Later this Year”). Last week MarkWest told unitholders (think shareholders) it’s time to sign your proxy statements allowing representatives to “vote yes” to the deal (see MarkWest Tells Unitholders Time to Sign Proxy for Marathon Sale). A few days later MarkWest co-founder and former CEO John Fox launched a publicity campaign to announce his strong opposition to the deal (see Former MarkWest Energy CEO Urges Vote Against Marathon Buyout). This week Marathon announced it is increasing its dowry–a one-time cash payment it will make to MarkWest unitholders–from $675 million to $1.075 billion. That $400 million increase pushes the deal value/offer to $15.1 billion. We don’t think it’s a coincidence that last week Fox came out with guns blazing against this deal and this week the dowry went up 63%…
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OH Supreme Court Sends Mixed Signal on “Home Rule” Issue

Earlier this year the Ohio Supreme Court ruled in a very important court case that the “city” (of 5,000 people) of Monroe Falls could not layer on its own oil and gas regulations over top of state regulations, effectively preventing Beck Energy from drilling on a site in the city already properly permitted (see OH Supreme Court Strikes Down Home Rule in Gas Drilling Case). It was assumed that case would provide precedence and settle the issue once and for all that towns can’t simply pass their own zoning regulations in an attempt to prevent oil and gas drilling. But it appears the mind of the Supremes is far from being settled. Beck Energy, following that case, pressed their advantage and asked the court for an order that directs Monroe Falls to not use zoning ordinances “to prohibit drilling for oil and gas in 99.06 percent of the city’s territory.” On Tuesday the Supreme Court dismissed the request without comment, leaving everyone to wonder what they really intend. It appears to not be a good sign for the drilling industry in Ohio…
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Eclipse Resources 3Q15: Production Up 163%, Net Loss $81M

Eclipse Resources, an exploration and production company focused solely on the Marcellus and Utica Shale region headquartered in State College, PA but focusing on Utica drilling, released its third quarter earnings and operational update. It was also just yesterday we told you about the rumor that Eclipse is shopping itself (see Marcellus/Utica Driller Eclipse Resources Looking for a Buyer). What does the 3Q15 update show? Production averaged 225.2 million cubic feet equivalent per day (MMcfe/d), up 163% over 3Q14. Eclipse drilled 9 gross (4.8 net) wells, completed 15 gross (7.2 net) wells and turned 22 gross (6.4 net) wells to sales. Because of smart hedging, the company got $2.86 per thousand cubic feet (Mcf) in 3Q15–10 cents per Mcf more than what gas has been trading for at the Henry Hub. But even with pumping way more gas and getting favorable pricing, it still wasn’t enough to prevent an $81 million net loss for the quarter. Yes, some of that was a paper loss (depreciation/amortization stuff)–but not all of it. Some of it was actual money out of pocket loss. Here’s the update…
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Shhh…Invenergy Plans Design Changes at Jessup Electric Plant

As MDN has previously chronicled, Chicago-based Invenergy hopes to build what will be the largest (to date) electric generating plant in the state of Pennsylvania powered by natural gas (see Public Hearing on NEPA Proposed Marcellus-Powered Electric Plant). Invenergy hopes to build the 1300-megawatt plant (incorrectly listed as 1500 megawatts in the excerpt below) in the borough of Jessup (Lackawanna County), near Scranton. The company is making a change in the design of the plant to make it a tad bit quieter, which will make the neighbors happy…
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3 Western PA Antis Weigh Appeal of Court Ruling in Zoning Case

Three anti-drillers in Westmoreland County, PA are continuing their quest to deny their neighbors the right to allow natural gas drilling. You may recall one week ago we told you that a clear-thinking western PA county judge ruled that there are two sides to the Act 13 court case–local municipalities don’t always have to rule you *can’t* allow drilling in certain areas, sometimes the decision goes the other way *to* allow it (see PA County Court Rules Drilling OK in Ag/Residential District). In this particular case, three ladies–Dolores Frederick, Patricia Hagaman and Beverly Taylor–have their knickers in a twist that one of their neighbors, a farm owned by John and Anne Slike, wants to allow CNX Gas (i.e. CONSOL Energy) to drill on their property, some 1,200 feet away. The three ladies lost. But as with antis everywhere, the rule of law makes no difference. They (and their lawyer) are still agitating to try and prevent the Slikes from moving forward. They’re deciding whether or not to appeal the decision…
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EXCO Stock Short Selling Goes Up; Board Member Buys 297K Shares

EXCO Resources is an exploration and production company operating in East Texas/North Louisiana (the Haynesville Shale), South Texas (the Eagle Ford Shale), and in the Marcellus Shale region–in Pennsylvania and West Virginia. EXCO has a sizable Marcellus presence with 145,000 net acres in the Marcellus, having drilled and now operating 124 horizontal Marcellus wells. They’re also a company facing stiff challenges. We’ve enumerated those challenges for more than a year (see our EXCO stories here). Recently there’s been an uptick in “short selling” of EXCO stock. What does that mean? In essence, it means an increasing number of investors believe the price of EXCO’s stock will head lower than it is right now (see our short selling tutorial, “Short Selling” – An Important Signal for Marcellus-Related Companies). Below is the news about an increase in EXCO stock short selling, with a preface to put it in context, so you know how to think about it. Also below is news that John Wilder, an EXCO board member, has just purchased 297,100 shares of EXCO stock for $314,926…
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Marcellus & Utica Shale Story Links: Thu, Nov 12, 2015

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: the rise of Rice Energy; Rex shifts to holding acreage strategy; who’s behind pipeline opposition; OH sees $5.7B in new o&g spending since spring; fighting fractivism; EPA hearings on CPP in Pittsburgh today & tomorrow; WV town bans injection wells; pipeline bill debate in MA draws big crowd; and more!
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