MHR Wiggles Out of One Midstream Contract, Sues to End Another

Two weeks ago Magnum Hunter Resources (MHR), a driller focused almost exclusively on the Marcellus/Utica and going through bankruptcy protection proceedings, struck a deal with pipeline company Texas Gas Transmission Inc. to terminate four existing contracts with company to use its pipelines. MHR was pressuring Texas Gas to cancel the contracts it has with MHR subsidiary Triad Hunter, but Texas Gas was resisting. In the end Texas Gas agreed to cancel the contracts provided they get a $15 million “unsecured claim” which grants Texas Gas the right to be near the front of the line to get paid $15M when MHR is either sold or emerges from bankruptcy proceedings. MHR isn’t, however, having as much success with canceling signed contracts for another of its subsidiaries in the Bakken Shale region. Bakken Hunter has an existing, signed contract with Oklahoma midstream company Oneok. Citing the recent Sabine Oil & Gas ruling in which that company was allowed to cancel midstream contracts during bankruptcy (see Midstream Nightmare Comes True: Judge Lets Driller Cancel Contracts), MHR is asking a Delaware bankruptcy court to allow them to wiggle out of the Oneok deal. In addition to updates on these two situations, we also have news that the Securities and Exchange Commission is at least partially blaming two former Magnum Hunter employees–a chief financial officer and chief account officer–for the company’s financial predicament…

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