United States
Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
(Check one)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from .......... to ..........
Commission File Number..........1-12508
MAGNUM HUNTER RESOURCES, INC.
Exact name of small business issuer as specified in its charter
Nevada 87-0462881
State or other jurisdiction of IRS employer identification No.
incorporation or organization
600 East Las Colinas Blvd., Suite 1200, Irving, Texas 75039
Address of principal executive offices
(972) 401-0752
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 5, 1997: 13,911,243
Transitional Small Business Disclosure Format (Check one) Yes No X
1
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements of Magnum Hunter Resources, Inc. ("Magnum
Hunter" or the "Company") required by Item 310(b) of Regulation S-B follow "Item
2. Management's Discussion and Analysis or Plan of Operation".
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with Magnum
Hunter's consolidated financial statements and the notes associated with them
contained in its Form 10-KSB for the year ended December 31, 1996. This
discussion should not be construed to imply that the results discussed herein
will necessarily continue into the future or that any conclusion reached herein
will necessarily be indicative of actual operating results in the future. Such
discussion represents only the best present assessment by management of Magnum
Hunter.
In June 1996, the Company acquired the Panoma Properties, which include
interests in 520 gas wells (including third party) in the Texas Panhandle and
Western Oklahoma and an adjoining 427-mile gas gathering system, from Burlington
Resources Inc. for $34.7 million. The Company assumed operations of nearly all
the wells and of the gathering system and began planning for increased density
development drilling in the Panoma area.
In January 1997, the Company purchased a 50% interest in a natural gas liquids
processing plant, the McLean Gas Plant, which is connected to the Panoma gas
gathering system, for $2.5 million. The related operating agreement allows the
Company to recoup its investment out of 100% of the net profits of the plant
before reverting to a 50% interest after payout.
In February 1997, the Company entered into an agreement with Burlington
Resources Inc. to purchase certain oil and gas properties located in the Permian
Basin (hereinafter referred to as the "Permian Basin Properties"), consisting of
1,852 producing oil and natural gas wells and associated acreage located in 25
field areas of West Texas and in 22 field areas of Southeast New Mexico. On
April 30, 1997, the Company closed on the purchase for a net price of
approximately $133 million, including, but not limited to, certain adjustments
for a January 1, 1997 effective date.
On April 29, 1997, the Company received and accepted two new loan commitments
from Bankers Trust Company, as Agent, and other banks for senior credit
facilities for the Company and several of its subsidiaries. The two new senior
credit facilities were structured as a $130 million revolving line of credit
with a term of five years and a $60 million one year senior subordinated bridge
facility convertible into a five year term loan. The new credit facilities were
conditioned, among other things, upon the closing of the Permian Basin
Properties from Burlington, which took place April 30, 1997.
2
<PAGE>
The revolving line of credit gives the Company the flexibility of choosing a
range of either "LIBOR" or "Prime" based interest rate options. This new credit
facility replaced the previously existing $100 million revolving credit
facility.
On May 29, 1997, the Company placed, through a Rule 144A private placement
offering, $140 million in Senior Notes due 2007. The Notes have a 10% coupon,
with interest payable on June 1 and December 1, commencing on December 1, 1997.
There is no restriction on the ability of any consolidated or unconsolidated
subsidiary to transfer funds to the Company in the form of cash dividends, loans
or advances. Net proceeds from the sale of the Senior Notes were used to
completely repay the Company's outstanding bridge loan facility in the principal
amount of $60 million with the remaining proceeds used to repay a substantial
portion of the Company's outstanding revolving credit facility. At that time,
the maximum commitment under the revolving credit facility was reduced from $130
million to $75 million, with a borrowing base of $60 million. The credit
facility was amended as of September 30, 1997, to increase the maximum
commitment from $75 million to $125 million, increase the borrowing base by $5
million to $65 million, and modify the interest expense coverage ratio test.
Results of Operations for the Nine Month Periods in 1997 and 1996
As discussed above, the Company acquired the Panoma Properties in June 1996, the
McLean Gas Plant in January 1997, and the Permian Basin Properties in April
1997. As such, the results of operations for the nine month period ended
September 30, 1997, included nine months of operations for Panoma and McLean and
five months for Permian Basin, while the corresponding period in 1996 contained
three months of operations for Panoma and no results related to McLean and
Permian Basin. Unless otherwise stated, the increases in the 1997 interim period
over the 1996 period were substantially the result of these acquisitions.
Oil and natural gas sales were $22,793,000 in 1997, a 259% increase over
1996. In 1997, the Company sold 489,771 barrels of oil, a 250% increase, and
6,450,700 Mcf of gas, a 295% increase. The price received for oil was $17.79 per
barrel and for gas was $2.18 per Mcf in 1997, representing an 11% decrease in
oil price and a 2% decrease in gas price compared to 1996. Oil and natural gas
production costs increased 270% to $8,521,000 in 1997 over 1996. The gross
operating margin from oil and natural gas production was $14,272,000 in 1997, a
252% increase over 1996, principally due to the volume increase of oil and gas
sold. On an equivalent unit basis, the gross margin was $1.52 per Mcfe in 1997
versus $1.64 in 1996, a 7% decrease, principally due to decline in sales price
received for both oil and gas between 1996 and 1997.
Gas gathering, marketing, and processing revenues were $7,721,000 in the 1997
period, a 146% increase over 1996, principally as a result of the acquisition of
the Panoma Gas Gathering System and the McLean Gas Plant. Costs from these
activities were $5,803,000 in 1997, a 121% increase over 1996. Gross operating
margin was $1,918,000 in 1997 versus $514,000 in 1996, a 273% increase. As a
result of the acquisition of the Panoma System, total gathering system
throughput increased 100% to
3
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20,193 Mcf per day in 1997 compared with 10,078 Mcf per day in 1996. Due to the
McLean Plant acquisition, natural gas plant processing throughput was 14,512 Mcf
per day in 1997 versus none reported in 1996. Gross operating margin from
gathering operations was $0.24 per Mcf of throughput in 1997 versus $0.29 per
Mcf in 1996. The gross operating margin from natural gas processing was $0.23
per Mcf of throughput versus none reported in 1996.
Revenues from oil field services and international sales were $3,792,000 in
1997, a $3,407,000 increase over 1996, principally due to an increase in sales
of Hunter Butcher International, L.L.C. in the amount of $3,398,000. Operating
costs were $3,482,000 in 1997, a $2,961,000 increase over 1996, also principally
due to Hunter Butcher. The gross operating margin from these activities was
$310,000 in 1997 versus a loss of $136,000 in the 1996 period. The margin from
Hunter Butcher operations was $60,000 in 1997 versus $32,000 in 1996. Oil field
services produced an operating margin of $250,000 in 1997 versus a loss of
$168,000 in 1996.
Depreciation and depletion expense increased 356% to $8,607,000 in 1997 due
to the acquisitions. Depletion expense on oil and gas production in 1997 was
$8,025,000, or $0.85 per Mcfe, versus $1,625,000, or $0.66 per Mcfe in 1996.
General and administrative expense was $1,128,000 in 1997, a 68% increase over
1996, due to increased staffing and other costs as a result of the acquisitions.
Operating profit increased to $6,765,000 in 1997 from $1,872,000 in 1996, a
261% increase. Other income increased 184% to $608,000 due to a gain on sale of
marketable securities. Interest expense increased to $9,298,000 in 1997 from
$1,550,000 in 1996, an increase of 500%, due to increased levels of borrowing
under the Company's revolving credit lines with banks, the 10% Senior Notes, and
bridge financing used to fund the acquisitions previously mentioned. The Company
incurred a net loss before income tax and minority interest of $1,925,000 in
1997, versus net income of $536,000 in 1996, principally due to interest expense
on the acquisitions exceeding operating income and due to the higher charge for
depreciation and depletion. The Company provided for a deferred income tax
benefit of $732,000 on this loss in 1997 versus deferred income tax expense of
$204,000 in 1996. After recording a $40,000 minority interest in Hunter Butcher,
the Company reported a net loss in 1997 before extraordinary items of
$1,234,000, or $0.14 per common share, versus a $332,000 net profit, or no cents
per common share, in 1996.
The Company realized an extraordinary loss of $1,384,000 ($0.10 per common
share) as required under Accounting Principles Board ("APB") Statement No. 26
and Statement of Financial Standards ("SFAS") No. 4, from the early
extinguishment of bank debt. The early extinguishment was a result of the new
10% Senior Notes financing and amended revolving credit agreements with banks
arranged to facilitate the $133 million purchase of the Permian Basin Properties
from Burlington Resources Inc. The net loss in 1997, after the extraordinary
charge applicable to common shareholders was $3,275,000 ($0.24 per common
share) compared to a loss of $50,000 (no cents per common share) in 1996. The
Company accrued $657,000 in dividends on its preferred stock in 1997 versus
$382,000 in 1996.
4
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Results of Operations for the Three Month Periods in 1997 and 1996
The results of operations for the three month period ended September 30, 1997,
included three months of operations for Panoma, McLean, and Permian Basin, while
the corresponding period in 1996 contained three months of operations for Panoma
and none for McLean and Permian. Unless otherwise stated, the increases in the
1997 interim period over the 1996 period were substantially the result of these
acquisitions.
Oil and natural gas sales were $11,002,000 in 1997, a 211% increase over 1996.
The Company sold 250,019 barrels of oil, a 400% increase, and 3,118,351 Mcf of
gas, a 173% increase, in 1997. The price received for oil was $17.28 per barrel
and for gas was $2.14 per Mcf in 1997, representing an 18% decrease in oil price
and a 1% decrease in gas price in 1997 compared to 1996. Oil and natural gas
production costs increased 221% to $3,781,000 in 1997 over 1996. The gross
operating margin from oil and natural gas production was $7,221,000 in 1997, a
206% increase over 1996. On an equivalent unit basis, the gross margin was $1.56
per Mcfe in 1997 versus $1.63 in 1996, a 4% decrease. The sales price declined
3% to $2.38 per Mcfe while production costs were $0.82 per Mcfe in both 1996 and
1997. These production costs are inclusive of gathering and overhead charges of
$0.12 per Mcfe in 1997. The overall increase in the gross operating margin from
1996 to 1997 was principally due to the 220% increase in Mcfe sold, from
1,444,264 Mcfe to 4,618,465 Mcfe.
Gas gathering, marketing, and processing revenues were $2,438,000 in the 1997
period, a 51% increase over 1996, principally as a result of the acquisition of
the McLean Gas Plant. Costs from these activities were $1,865,000 in 1997, a 42%
increase over 1996. Gross operating margin was $573,000 in 1997 versus $300,000
in 1996, a 91% increase. Gathering system throughput decreased 4% to 20,442 Mcf
per day in 1997 compared with 21,310 Mcf per day in 1996. Due to the McLean
Plant acquisition, natural gas plant processing throughput was 15,615 Mcf per
day in 1997 versus none reported in 1996. Gross operating margin from gathering
operations was $0.16 per Mcf of throughput in 1997 versus $0.30 per Mcf in 1996.
The gross operating margin from natural gas processing was $0.25 per Mcf of
throughput in 1997 versus none reported in 1996.
Revenues from oil field services and international sales was $186,000 in 1997, a
1% increase over 1996. Operating costs decreased 70% to $58,000 in 1997 from
1996 due to an increased allocation of operating costs to oil and gas production
costs. The gross operating margin from these activities was $128,000 in 1997
versus a loss of $10,000 in the 1996 period.
Depreciation and depletion expense increased 416% to $4,147,000 in 1997 due to
the acquisitions. Depletion expense on oil and gas production was $3,945,000, or
$0.85 per Mcfe, in 1997 versus $650,000, or $0.45 per Mcfe in 1996. General and
administrative expense was $477,000 in 1997, a 110% increase over 1996, due to
increased staffing and other costs as a result of the acquisitions.
Operating profit increased to $3,298,000 in 1997 from $1,616,000 in 1996, a 104%
increase. Other income was $453,000 in 1997, an increase of $425,000, due to a
gain on sale of marketable securities. Interest expense increased to $4,540,000
in 1997 from $1,051,000 in 1996, an increase of 332%, due
5
<PAGE>
to increased levels of borrowing under the Company's revolving credit lines with
banks and the 10% Senior Notes used to fund the acquisitions previously
mentioned. The Company incurred a net loss before income tax and minority
interest of $789,000 in 1997, versus income of $593,000 in 1996, principally due
to interest expense on the acquisitions exceeding operating income, inclusive of
depreciation and depletion in the total amount of $1,242,000. The Company
provided for a deferred income tax benefit of $300,000 on this loss in 1997
versus deferred income tax expense of $204,000 in 1996. The Company reported a
net loss of $509,000, or $0.05 per common share, in 1997 versus income of
$389,000, or $0.03 per common share in 1996. The Company accrued $219,000 in
dividends on its preferred stock in 1997 versus $42,000 in 1996.
Liquidity and Capital Resources
The Company has three principal operating sources of operating cash: (i) sales
of oil and gas, (ii) revenues from gas gathering, processing, and marketing, and
(iii) revenues from petroleum management and consulting services. The Company's
cash flow is highly dependent upon oil and gas prices. Decreases in the market
price of oil and gas could result in reductions of both cash flow and the
Borrowing Base under the Company's Credit Facility, which would result in
decreased funds available, including funds for capital expenditures.
On April 30, 1997 the Company closed the acquisition of the Permian Basin
Properties for a net purchase price of approximately $133.0 million. At the same
time, the Company's previously existing $100.0 million credit facility was
replaced by two new credit facilities, the $130.0 million Credit Facility and
the $60.0 million Term Loan Facility, for a total of $190.0 million. The initial
advances under these new facilities totaled $179.5 million, including funds to
complete the Permian Basin Acquisition, to pay principal and accrued interest
remaining on the Company's previous credit facility, and to provide cash for
working capital purposes.
On May 29, 1997 the Company sold, through a Rule 144A private placement
offering, $140.0 million aggregate principal amount of Notes. Net proceeds from
the sale of the Notes were used to completely repay the Company's Term Loan
Facility in the principal amount of $60.0 million and to repay a substantial
portion of the amount outstanding under the Credit Facility. The Notes have a
10% coupon, with interest payable on June 1 and December 1 commencing on
December 1, 1997. After pay down, the Credit Facility was reduced from $130.0
million to $75.0 million, with a Borrowing Base of $60.0 million. Total
long-term debt under the Credit Facility at September 30, 1997 was $48.0
million, leaving $12.0 million available to draw at such time, prior to the
amendment discussed below and the next Borrowing Base redetermination based upon
financial results of the Company. At October 29, 1997, total long-term debt
under the Credit Facility was $50.0 million, leaving $10.0 million available to
draw at such time. At September 30, 1997, the Company has $3.1 million in cash
and cash equivalents and $2.1 million in net working capital, in addition to the
funds available under the Credit Facility. The Company recently amended its
Credit Facility with its lenders resulting in an increase of the amount of the
Credit Facility to $125.0 million, an increase of the Borrowing Base to $65.0
million and a modification of the interest expense coverage ratio covenant.
6
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The Company has called its publicly traded Warrants for redemption on November
7, 1997 at a redemption price of $0.02 per Warrant. The Warrants are presently
exercisable for Common Stock at an exercise price of $5.50 per share. Because
the closing sale price of the Common Stock on November 3, 1997 was $7.75 per
share, the Company anticipates that substantially all of the Warrants will be
exercised. Assuming that all the Warrants are exercised, the Company will
receive cash proceeds in the amount of approximately $4.7 million.
On October 30, 1997 the Company announced that it had filed a registration
statement with the Securities and Exchange Commission to register 6.5 million
shares of common stock to be sold to the public ("Offering"). The proceeds
received from the Offering will be used to repay substantially all of the
outstanding indebtedness under the Credit Facility. The Company intends to
reborrow amounts under the Credit Facility to fund exploration and development
activities, potentially expand operations, including acquisitions, and other
general corporate purposes.
For fiscal 1997 the Company is currently projecting that it will spend
approximately $20.0 million on development and exploration activities, including
$5.0 million budgeted for development projects on the Permian Basin Properties
and $3.0 million budgeted for exploration projects. In addition, with respect to
the recently closed Permian Basin Acquisition, the Company anticipates that it
will spend approximately $38.1 million over a four year period beginning in 1997
in a development program to enhance an existing waterflood project in the
Westbrook Field located in Mitchell County, Texas. For fiscal 1998, the Company
has budgeted approximately $36.0 million on development and exploration
activities, of which $6.0 million is projected to be spent on exploration
projects. The amount and allocation of future capital expenditures will depend
on a number of factors that are not entirely within the Company's control or
ability to forecast, including drilling results and changes in oil and gas
prices. As a result, actual capital expenditures may vary significantly from
current expectations.
Based upon the Company's anticipated level of operations, the Company
believes that cash flow from operations together with the availability under the
Credit Facility (approximately $15.0 million as of November 3, 1997) will be
adequate to meet its anticipated requirements for working capital, capital
expenditures and scheduled interest payments for the foreseeable future. As
referenced above, the Company plans on applying the net proceeds received from
the Offering and the proceeds received from full exercise of the Warrants to the
outstanding debt balance on the Credit Facility. Adjusting for these items and
depending upon the final sales price of the Company's common stock, the Company
anticipates having approximately $65 million available for borrowing under the
Credit Facility.
Inflation and Changes in Prices
During the past several years, the Company has experienced some inflation in oil
and natural gas prices with moderate increases in property acquisition and
development costs. During 1996, the Company received somewhat higher commodity
prices for the natural resources produced from its properties. The results of
operations and cash flow of the Company have been, and will continue to be
affected to a certain extent, by the volatility in oil and natural gas prices.
Should the Company experience a
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significant increase in oil and natural gas prices that is sustained over a
prolonged period, it would expect that there would also be a corresponding
increase in oil and natural gas finding costs, lease acquisition costs, and
operating expenses. Periodically the Company enters into futures, options, and
swap contracts to reduce the effect of fluctuations in crude oil and natural gas
prices. It is policy of the Company not to enter into any such arrangements
which exceed 50% of the Company's oil and natural gas production during the
next 12 months.
The Company markets gas for its own account, which exposes the Company to the
attendant commodities risk. Substantially all of the Company's gas production is
currently sold to gas marketing firms or end users either on the spot market on
a month-to-month basis at prevailing spot market prices or under long-term
contracts based on current spot market prices.
Hedging Activity
Periodically, the Company enters into futures, options, and swap contracts to
reduce the effects of fluctuations in crude oil and natural gas prices. As of
September 30, 1997, the Company had 33% of its oil production and 43% of its gas
production hedged. At September 30, 1997, the Company had open contracts for oil
price collars of 30,000 Bbls of oil per month (with cap and floor prices of
$23.25 and $18.50, respectively) through December 1998. At September 30, 1997,
the Company had open contracts for gas price swaps of 100,000 MMBtu of gas per
month at $1.905 per MMBtu through January 1998, 100,000 MMBtu of gas per month
at $1.77 per MMBtu through January 1998 and 300,000 MMBtu of gas per month at an
average price of $2.67 per MMBtu through March 1998. The average Btu content of
gas produced by the Company exceeds 1,100 Btu per Mcf of gas. Therefore, each of
the above gas prices should be increased by 10% to reflect the actual gas price
per Mcf received by the Company. All of these swaps are against the El Paso
Permian Basin Index. These contracts expire monthly. The gains and losses on the
Company's hedging transactions are determined as the difference between the
contract price and a reference price, generally closing prices on the New York
Mercantile Exchange. The resulting transaction gains and losses are determined
monthly and are included in the period the hedged production or inventory is
sold.
Year 2000 Modification
The Company is currently reviewing its computer systems in order to evaluate
necessary modifications for the year 2000. The Company does not currently
anticipate that it will incur material expenditures to complete any such
modifications.
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<TABLE>
<CAPTION>
MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
<S> <C>
September 30,
1997
----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,081
Accounts receivable
Trade, net of allowance of $133 14,211
Due from affiliates 119
Notes receivable from affiliate 412
Current portion of long-term note receivable 619
Prepaid and other 1,024
---------------
TOTAL CURRENT ASSETS 19,466
---------------
PROPERTY, PLANT AND EQUIPMENT
Oil and gas properties, full cost method
Unproved 460
Proved 215,513
Pipelines 9,841
Other property 653
----------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 226,467
Accumulated depreciation, depletion and impairment (13,467)
----------------
NET PROPERTY, PLANT AND EQUIPMENT 213,000
OTHER ASSETS
Deposits and other assets 6,046
Long-term notes receivable, net of imputed interest 1,646
----------------
TOTAL ASSETS $ 240,158
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables and accrued liabilities $ 13,753
Dividends payable 219
Suspended revenue payable 846
Current maturities of long-term debt 22
Notes payable 2,699
----------------
TOTAL CURRENT LIABILITIES 17,539
----------------
LONG-TERM LIABILITIES
Long-term debt, less current maturities 188,027
Production payment liability 790
Deferred income taxes 1,858
Minority interest 40
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 10,000,000 shares authorized,
216,000 designated as Series A; 80,000 shares issued and outstanding,
liquidation amount $0 -
1,000,000 shares designated as 1996 Series A
Convertible; 1,000,000 issued and outstanding, liquidation
amount $10,000,000 1
Common stock - $.002 par value; 50,000,000 shares authorized,
14,271,975 shares issued 29
Additional paid-in capital 40,291
Accumulated deficit (8,416)
-----------------
31,905
Treasury stock (538,633 shares of common stock) (1)
-----------------
TOTAL STOCKHOLDERS' EQUITY 31,904
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 240,158
=================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
9
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MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------------------
1997 1996 1997 1996
--------------------------------------------------------------
Operating Revenues:
Oil and gas sales $ 11,002 $ 3,536 $ 22,793 $ 6,357
Gas gathering, marketing and processing 2,438 1,615 7,721 3,143
Oil field services and international sales 186 184 3,792 385
--------------------------------------------------------------
Total Operating Revenues 13,626 5,335 34,306 9,885
--------------------------------------------------------------
Operating Costs and Expenses
Oil and gas production 3,781 1,179 8,521 2,305
Gas gathering, marketing and processing 1,865 1,315 5,803 2,629
Oil field services and international sales 58 194 3,482 521
Depreciation and depletion 4,147 804 8,607 1,888
General and administrative 477 227 1,128 670
--------------------------------------------------------------
Total Operating Costs and Expenses 10,328 3,719 27,541 8,013
--------------------------------------------------------------
Operating Profit (Loss) 3,298 1,616 6,765 1,872
Other income 453 28 608 214
Interest expense (4,540) (1,051) (9,298) (1,550)
--------------------------------------------------------------
Net Income (Loss) before income tax and minority interest (789) 593 (1,925) 536
Benefit (Provision) for deferred income tax 300 (204) 731 (204)
--------------------------------------------------------------
Net Income (Loss) before minority interest (489) 389 (1,194) 332
Minority interest in subsidiary earnings (20) - (40) -
--------------------------------------------------------------
Net Income (Loss) Before Extraordinary Loss (509) 389 (1,234) 332
Extraordinary Loss From Early Extinguishment of Debt - - (1,384) -
--------------------------------------------------------------
Net Income (Loss) (509) 389 (2,618) 332
Dividends Applicable to Preferred Stock (219) (42) (657) (382)
--------------------------------------------------------------
Loss Applicable to Common Shares $ (728) $ 347 $ (3,275) $ (50)
==============================================================
Loss Before Extraordinary Loss per Common Share $ (0.05) $ 0.03 $ (0.14) $ 0.00
Extraordinary Loss per Common Share $ - $ $ (0.10) $ -
--------------------------------------------------------------
Loss per Common Share $ (0.05) $ 0.03 $ (0.24) $ 0.00
==============================================================
Common Shares Used In Per Share Calculation 13,687,278 12,924,967 13,659,170 12,084,041
==============================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
10
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MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
-------------------------------
1997 1996
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,618) $ 332
Adjustments to reconcile net income (loss) to cash provided by
(used for) operating activities:
Extraordinary loss 1,384 -
Depreciation and depletion 8,607 1,888
Amortization of financing fees 330 -
Deferred income taxes (732) 204
Minority interest 40 -
(Gain) Loss on sale of assets (333) (143)
Other 32 -
Change in certain assets and liabilities
Accounts and notes receivables (9,717) (2,317)
Other current assets (972) (160)
Deposits and other assets - (376)
Accounts payable and accrued liabilities 9,875 2,436
-------------------------------
NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES $ 5,897 $ 1,864
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of assets 953 188
Additions to property and equipment (148,429) (38,787)
Loan made for promissory note receivable (666) -
Payments received on promissory note receivable 183 -
-------------------------------
NET CASH USED BY INVESTING ACTIVITIES (147,959) (38,599)
-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt and production payment 337,500 55,313
Fees paid related to financing activities (7,936) -
Proceeds from short-term notes payable 2,699 -
Payments of principal on long-term debt and production payment (188,364) (17,710)
Payment of fees on issuance of preferred stock (505) -
Proceeds from issuance of common and preferred stock,
net of offering costs 522 -
Redemption of preferred stock - (295)
Dividends paid (460) (438)
-------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 143,456 36,870
-------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,394 135
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,687 1,544
-------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,081 $ 1,679
===============================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
11
<PAGE>
MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September, 1997
(Unaudited)
NOTE 1 - MANAGEMENT'S REPRESENTATION
The consolidated balance sheet as of September 30, 1997, the consolidated
statements of operations for the nine months ended September 30, 1997 and 1996,
and the consolidated statements of cash flows for the nine month periods then
ended are unaudited. In the opinion of management, all necessary adjustments
(which include only normal recurring adjustments) have been made to present
fairly the financial position, results of operations and changes in cash flows
for the three month periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the December 31, 1996 annual report on Form 10-KSB for the
Company. The results of operations for the nine and three month periods ended
September 30, 1997, are not necessarily indicative of the operating results for
the full year.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. Certain items
have been reclassified to conform with the current presentation.
The Company is a holding company with no significant assets or operations other
than its investments in its subsidiaries. The wholly-owned subsidiaries of the
Company are direct Guarantors of the Company's Section 144 A Notes and have
fully and unconditionally guaranteed the Notes on a joint and several basis. The
Guarantors comprise all of the direct and indirect subsidiaries of the Company
(other than inconsequential subsidiaries), and the Company has not presented
separate financial statements and other disclosures concerning each Guarantor
because management has determined that such information is not material to
investors. There is no restriction on the ability of consolidated or
unconsolidated subsidiaries to transfer funds to the Company in the form of cash
dividends, loans, or advances.
NOTE 2 - RECENT EVENTS
In February, 1997, the Company entered into a definitive agreement with
Burlington Resources, Inc. to acquire for $143.5 million, subject to certain
purchase price adjustments, effective January 1, 1997, the Permian Basin
Properties consisting of 25 field areas in West Texas and 22 field areas in
Southeast New Mexico containing 1,852 producing oil and natural gas wells. In
accordance with the definitive acquisition agreement, the Company made a
performance deposit of $10 million
12
<PAGE>
against the purchase price.
On April 30, 1997, the Company closed on the purchase of the Permian Basin
Properties for a net purchase price of approximately $133 million, including,
but not limited to, certain adjustments for a January 1, 1997 effective date.
The Company financed the acquisition of the Permian Basin Properties with a new
$130.0 million credit facility (the "New Credit Facility") and a senior
subordinated credit facility of $60.0 million (the "Bridge Loan Facility").
Borrowings of $119.5 million under the New Credit Facility and $60.0 million
under the Bridge Loan Facility were used to pay the $123.0 million balance of
the $133.0 million net purchase price for the Permian Basin Properties, to repay
the $53.7 million in outstanding indebtedness as of April 30, 1997 under the
Company's previous $100.0 million credit facility, and to pay the costs
associated with the Permian Basin acquisition and the related financings.
On May 28, 1997, the Company completed an offering of $140,000,000 aggregate
principal amount of its 10% Senior Notes due 2007 (the "Notes"). Interest on the
Notes accrue from their date of original issuance and are payable semi-annually
in arrears on June 1 and December 1 of each year, commencing on December 1,
1997, at the rate of 10% per annum. The Notes are redeemable, in whole or in
part, at the option of the Company on or after June 1, 2002, at decreasing
redemption prices, plus accrued interest to the date of redemption. The Notes
are general unsecured obligations of the Company and rank pari passu with any
unsubordinated indebtedness of the Company and rank senior in right of payment
to all subordinated obligations of the Company. The net proceeds from the
offering were approximately $135.5 million after deducting fees and expenses of
approximately $4.5 million payable by the Company. The Company utilized the net
proceeds to repay the $60.0 million of outstanding indebtedness under the Bridge
Loan Facility and to reduce indebtedness under the New Credit Facility by
approximately $75.0 million. Concurrent with the pay-down, the Borrowing Base
was set at $60.0 million. Total long-term debt under the Credit Facility at
September 30, 1997 was $48.0 million. The Company recently amended its Credit
Facility with its liabilities effective as of September 30, 1997, to increase
the amount of the Credit Facility to $125.0 million, to increase the amount of
the borrowing base to $65.0 million, and to modify a loan covenant.
The Company has called its publically traded Warrants for redemption on November
7, 1997 at a redemption price of $0.02 per Warrant. The Warrants are presently
exercisable for Common Stock at an exercise price of $5.50 per share. The
Company anticipates that substantially all the Warrants will be exercised, and
if so, the Company will receive cash proceeds in the amount of approximately
$4.7 million.
On October 30, 1997, the Company filed a registration statement with the
Securities and Exchange Commission ("SEC") to register 6.5 million shares of
common stock to be sold by the Company and an additional 150,000 shares of
common stock to be sold by a selling shareholder. The proceeds received from the
sale of shares by the Company will be used to repay substantially all of the
outstanding indebtedness under the Company's senior bank credit facility.
13
<PAGE>
On November 4, 1997 the Company announced that one of its wholly-owned
subsidiaries, Hunter Gas Gathering, Inc., entered into a non-binding letter of
intent to acquire a 30% ownership interest in a privately held gas marketing
company for an estimated consideration of approximately $5 million payable by
the Company in restricted common stock. The proposed transaction is subject
to due diligence, negotiation of a definitive agreement and other contingencies.
14
<PAGE>
PART II -- OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders
An annual meeting of the stockholders of the Company was held on the 26th
day of August, 1997. The results of the voting for (i) the election of directors
and (ii) the proposal to ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors was as follows:
(1) For each director:
Gary C. Evans: 10,670,054 shares voted in favor of the nominee, 10,720
shares voted against the nominee and 14,342 shares abstained from voting.
Matthew C. Lutz: 10,669,799 shares voted in favor of the nominee, 10,720
shares voted against the nominee and 14,597 shares abstained from voting.
Gerald W. Bolfing: 10,669,699 shares voted in favor of the nominee, 10,820
shares voted against the nominee and 14,597 shares abstained from voting.
Oscar C. Lindemann: 10,668,099 shares voted in favor of the nominee, 12,420
shares voted against the nominee and 14,597 shares abstained from voting.
John H. Trescot, Jr.: 10,668,099 shares voted in favor of the nominee,
12,420 shares voted against the nominee and 14,597 shares abstained from voting.
James E. Upfield: 10,668,199 shares voted in favor of the nominee, 12,320
shares voted against the nominee and 14,597 shares abstained from voting.
(2) For the ratification of the appointment of Deloitte & Touche LLP as the
Corporation's independent auditors: 10,653,272 shares voted in favor of the
above-described proposal, 23,494 shares voted against the above-described
proposal and 18,350 shares abstained from voting.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 & 4.1 Articles of Incorporation (Incorporated by reference to
Registration Statement on Form S-18, File No. 33-30298-D)
3.2 & 4.2 Articles of Amendment to Articles of Incorporation
(Incorporated by reference to Form 10-K for the year ended
December 31, 1990)
3.3 & 4.3 Articles of Amendment to Articles of Incorporation(Incorporated
by reference to Registration Statement on Form SB-2, File No.
33-66190)
3.4 & 4.4 Articles of Amendment to Articles of Incorporation
(Incorporated by reference to Registration Statement on
Form S-3, File No. 333-30453)
3.5 & 4.5 By-Laws, as Amended (Incorporated by reference to Registration
Statement on Form SB-2File No. 33-66190)
3.6 & 4.6 Certificate of Designation of 1996 Series A Preferred Stock
(Incorporated by reference to Form 8-K dated December 26, 1996,
filed January 3, 1997)
3.7 & 4.7 Amendment to Certificate of Designations for 1996 Series A
Convertible Preferred Stock (Incorporated by reference to
Registration Statement on Form S-3, File No. 333-30453)
4.8 Indenture dated May 29, 1997 between Magnum Hunter Resources,
the subsidiary guarantors named therein
and First Union National Bank of North Carolina, as Trustee
(Incorporated by Reference to Registration Statement on Form
S-4 File No. 333- 31149)
4.9 Form of 10% Senior Note due 2007 (Incorporated by Reference to
Registration Statement on Form S-4 File No.
333- 31149)
10.1 Amended and Restated Credit Agreement, dated April 30, 1997,
between Magnum Hunter Resources,Inc. and Bankers Trust Company,
et al. (Incorporated by Reference to Registration Statement on
Form S-4 File No.333- 31149)
10.2 First Amendment to Amended and Restated Credit Agreement, dated
April 30, 1997, between Magnum Hunter Resources, Inc. and
Bankers Trust Company, et al (Incorporated by Reference to
Registration Statement on Form S-4 File No. 333- 31149)
10.3 * Second Amendment to the Amended and Restated Credit Agreement
dated April 30, 1997, between Magnum Hunter Resources, Inc. and
Bankers Trust Company, et al.
10.4 Employment Agreementfor Gary C Evans (Incorporated by reference
to Registration Statement on Form S-4,File No. 333-2290)
10.5 Employment Agreement for Matthew C.Lutz Incorporated by
reference to Registration Statement on Form S-4,File No.
333-2290)
10.6 Stock Purchase Agreement among Magnum Hunter Resources, Inc.
and Trust Company of the West and TCW Asset Management Company,
in the capacities described herein, TCW Debt and Royalty Fund
IVB and TCW Debt and Royalty Fund IVC, dated as of December 6,
1996(Incorporated by reference to Form 8-K dated December 26,
1996, filed January 3, 1997)
10.7 Registration Rights Agreement, dated May 29, 1997, between
Magnum Hunter Resources, Inc. and Bankers Trust Company, et al.
(Incorporated by Reference to Registration Statementon Form S-4
File No.333-31149)
10.8 Purchase and Sale Agreement, dated May 17, 1996 between
Meridian Oil, Inc. and ConMag Energy Corporation (Incorporated
by reference to Form 8-K, dated June 28, 1996, filed July 12,
1996)
10.9 Purchase and Sale Agreement, dated February 27, 1997 among
Burlington Resources Oil and Gas Company, Glacier Park Company
and Magnum Hunter Production, Inc (Incorporated by reference to
Form 8-K, dated April 30, 1997, filed May 12, 1997)
* Filed herewith
(b) Reports on Form 8-K
Items Reported F/S Included Date of Event Date Filed
None
15
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAGNUM HUNTER RESOURCES, INC.
By /s/ Gary C. Evans
--------------------------- November 5, 1997
Gary C. Evans
President and Chief Executive Officer
By /s/ Chris Tong November 5, 1997
----------------------------
Chris Tong
Sr. Vice President and
Chief Financial Officer
By /s/ David S. Krueger November 5 , 1997
---------------------------
David S. Krueger
Vice President and
Chief Accounting Officer
By /s/ Morgan F. Johnston November 5, 1997
-----------------------------
Morgan F. Johnston
Vice President, General Counsel and
Secretary
EXHIBIT 10-3
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This Second Amendment to Amended and Restated Credit Agreement (this
"Amendment") is dated as of September 30, 1997, by and among MAGNUM HUNTER
RESOURCES, INC., a Nevada corporation (the "Borrower"), each Bank (as defined in
the Credit Agreement), BANKERS TRUST COMPANY, individually, as administrative
agent (in such capacity, together with its successors in such capacity, the
"Administrative Agent"), and as an issuing bank, and BANQUE PARIBAS, a French
bank acting through its Houston Agency, individually, as collateral agent (in
such capacity, together with its successors in such capacity, the "Collateral
Agent"), and as documentation agent (in such capacity, together with its
successors in such capacity, the "Documentation Agent").
R E C I T A L S:
WHEREAS, the Borrower, each Bank then a party, the Administrative
Agent, the Documentation Agent, and First Union National Bank ("First Union"),
as collateral agent and syndication agent, entered into that certain Amended and
Restated Credit Agreement dated as of April 30, 1997 (the "Original Credit
Agreement") pursuant to which the Banks have agreed to make revolving credit
loans available to the Borrower under the terms and provisions stated therein;
and
WHEREAS, the parties to the Original Credit Agreement entered into a
First Amendment to Amended and Restated Credit Agreement, Resignation of
Collateral Agent and Appointment of Substitute Collateral Agent dated as of May
29, 1997 (together with the Original Credit Agreement, the "Credit Agreement");
and
WHEREAS, as of October 1, 1997,CIBC,Inc. became a Bank under the Credit
Agreement; and
WHEREAS, the Borrower has requested that the Banks and the Agents (i)
increase the Borrowing Base to $65,000,000, (ii) increase the Commitment of each
Bank, (iii) amend the Consolidated Interest Coverage Ratio and (iv) amend
certain provisions of the Credit Agreement; and
WHEREAS, the Banks and the Agents are willing to amend the Credit
Agreement as hereinafter provided; and
WHEREAS, the Borrower, the Banks and the Agents now desire to amend the
Credit Agreement as herein set forth.
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 1
<PAGE>
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meaning as in the
Credit Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.1 Additional Definitions. Section 1.1 is amended by adding the
following definitions in alphabetical order:
"Dissenting Bank" has the meaning assigned to it in Section 2.8(c) hereof.
"Unused Availability" means an amount equal to the difference between the
Borrowing Base and (a) outstanding Loans plus (b) outstanding Letter of Credit
Liabilities.
Section 2.2 Amendment to Definition of Consolidated Current Assets. The
definition of "Consolidated Current Assets" found in Section 1.1 is amended by
adding the following phrase at the end thereof: "plus Unused Availability".
Section 2.3 Amendment to Definition of Majority Banks. The definition of
"Majority Banks" found in Section 1.1 is amended by deleting each reference to
"75%" and inserting in lieu thereof references to "80%".
Section 2.4 Amendment to Section 2.8.
(a) Section 2.8(a) is amended by deleting the second and third sentences
thereof and inserting the following in lieu thereof:
"Effective October 1, 1997, the Borrowing Base shall be $65,000,000 and
shall be redetermined from time to time as provided herein."
(b) Section 2.8 is further amended by adding thereto a new subsection
reading as follows:
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 2
<PAGE>
"(c) In the event a Bank or Banks do not approve a proposed Borrowing Base
or Borrowing Base determined after consultation, but the Required Banks do, the
Administrative Agent and the Borrower may, but shall not be required to, replace
the Dissenting Bank with an Eligible Assignee within 90 days of the applicable
Determination Date or date of special determination and upon payment to the
Dissenting Bank of all of its Loans and execution and delivery by the Eligible
Assignee of an Assignment and Acceptance, the Dissenting Bank shall no longer be
a Bank hereunder or have any Commitment or obligations to the Borrower."
Section 2.5 Amendment to Section 10.3. Section 10.3 is amended by adding
the following phrase immediately after the word "Person" found in the fourth
line thereof: "except as specifically permitted in Section 10.5 hereof" and by
changing the reference to "$1,000,000" to $1,500,000."
Section 2.6 Amendment to Section 10.5. Section 10.5 is amended by deleting
the word "The" from the first line and adding the following phrase before the
word "Borrower" in said line: "Without the prior written consent of the Majority
Banks, the" and by deleting the reference to "350,000" found in the fifth line
thereof and inserting in lieu thereof a reference to "1,500,000".
Section 2.7 Amendment to Section 11.1. Section 11.1 is amended in its
entirety to read as follows:
"Section 11.1 Consolidated Interest Coverage Ratio. The Borrower will not
permit its Consolidated Interest Coverage Ratio, measured as of the last day of
any calendar quarter for the twelve month period then ended, to be less than (a)
1.80 to 1.0 at the end of any calendar quarter through March 31, 1998, (b) 2.0
to 1.0 at the end of any calendar quarter from April 1, 1998 through June 30,
1998, (c) 2.25 to 1.0 at the end of any calendar quarter from July 1, 1998
through September 30, 1998 and (d) 2.50 to 1.0 at the end of any calendar
quarter after September 30, 1998."
Section 2.8 Amendment to Section 11.4. Section 11.4 is amended in its
entirety to read as follows:
"Section 11.4 Debt to Capitalization Ratio. Borrower will not permit its
Debt to Capitalization Ratio, measured as of the last day of any calendar
quarter to be more than (a) 0.86 to 1.0 as of the end of any calendar quarter,
through March 31, 1998, (b) 0.75 to 1.0 as of the last day of any calendar
quarter after March 31, 1998 through September 30, 1998 and (c) 0.70 to 1.0 as
of the last day of any calendar quarter after September 30, 1998."
Section 2.9 Increased Commitments. The Commitments listed on the signature
pages to the Credit Agreement are hereby deleted, and the new Commitments shall
be as set forth on the signature pages to this Amendment.
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 3
<PAGE>
Section 2.10 Borrower's Area Code. The area code for the Borrower's
telephone and telecopy numbers found on the Borrower's signature page to the
Credit Agreement is changed from "214" to "972".
Section 2.11 New Notes. The Borrower agrees to execute new Notes in favor
of the Banks, in the principal amount of each such Bank's modified Commitment.
ARTICLE III
Conditions to Precedent
Section 3.1 Necessary Documentation. This Amendment shall be effective when
the Agent shall have received the following, each dated (unless otherwise noted)
the date hereof, in form and substance satisfactory to the Agents:
(a) This Amendment executed by all parties;
(b) Replacement Notes, dated October 1, 1997, executed by the Borrower in
respect of the Assignment and Acceptance from the remaining Banks under the
Original Credit Agreement to CIBC, Inc.;
(c) A Certificate of the Chief Financial Officer of the Borrower in the
form attached hereto as Annex I;
(d) Notes executed by the Borrower reflecting the Commitments set out on
the signature pages to this Amendment; and
(e) Resolutions of the Board of Directors of the Borrower and each
Obligated Party, certified by its Secretary or Assistant Secretary, that
authorized the execution and delivery of this Amendment and the replacement
Notes.
Section 3.2 Representations and Warranties. All representations and
warranties contained in the Credit Agreement shall be true and correct on and as
of the date hereof with the same force and effect as if such representations and
warranties had been made on and as of such date.
Section 3.3 Additional Documentation. The Agents shall have such additional
approvals, opinions or documents as the Agents or their counsel, Winstead
Sechrest & Minick P.C., may reasonably request.
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 4
<PAGE>
ARTICLE IV
Miscellaneous
Section 4.1 Ratifications, Representations and Warranties. Except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Credit Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. The representations and warranties
contained herein and in all other Loan Documents, as amended hereby, shall be
true and correct as of, and as if made on, the date hereof. The Borrower, the
Banks and the Agents agree that the Credit Agreement as amended hereby shall
continue to be legal, valid, binding and enforceable in accordance with its
terms.
Section 4.2 Reference to the Credit Agreement. Each of the Loan Documents,
including the Credit Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Credit Agreement as amended hereby, are hereby
amended so that any reference in such Loan Documents to the Credit Agreement
shall mean a reference to the Credit Agreement as amended hereby.
Section 4.3 Expenses. The Borrower agrees to pay on demand all expenses set
forth in Section 14.1 of the Credit Agreement.
Section 4.4 Severability. Any provisions of this Amendment held by court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
Section 4.5 Applicable Law. This Amendment and all other Loan Documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of New York.
Section 4.6 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Banks, the Agents and the Borrower and their
respective successors and assigns.
Section 4.7 Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
but all of which when taken together shall constitute one and the same
instrument.
Section 4.8 Headings. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
Section 4.9 NO ORAL AGREEMENTS. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR,
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 5
<PAGE>
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Balance of this page intentionally left blank.]
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 6
<PAGE>
EXECUTED as of the day and year first above written.
BORROWER:
MAGNUM HUNTER RESOURCES, INC.
By:
Name:
Title:
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY
By
Name:
Title:
DOCUMENTATION AGENT
AND COLLATERAL AGENT:
BANQUE PARIBAS
By:
Name:
Title:
- and -
By:
Michael H. Fiuzat
Vice President
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 7
<PAGE>
ISSUING BANK:
BANKERS TRUST COMPANY
By
Name:
Title:
BANKS:
Commitment: BANQUE PARIBAS
$46,875,000.00
By:
Name:
Title:
- and -
By:
Michael H. Fiuzat
Vice President
Commitment: BANKERS TRUST COMPANY
$46,875,000.00
By:
Name:
Title:
Commitment: CIBC, INC.
$31,250,000.00
By:
Name:
Title:
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 8
<PAGE>
ACKNOWLEDGEMENT BY GUARANTORS
Each of the undersigned Guarantors hereby (i) consents to the terms and
conditions of the Amendment, (ii) confirms and ratifies the terms of the Amended
and Restated Subsidiary Guaranty, (iii) acknowledges and agrees that its consent
is not required for the effectiveness of the Amendment and (iv) represents and
warrants that (a) no Default or Event of Default has occurred and is continuing,
(b) it is in full compliance with all covenants and agreements pertaining to it
in the Credit Documents and (c) it has reviewed a copy of the Amendment.
Executed as of September 30, 1997.
GUARANTORS:
HUNTER GAS GATHERING, INC.
GRUY PETROLEUM MANAGEMENT CO.
MAGNUM HUNTER PRODUCTION, INC.
CONMAG ENERGY CORPORATION
RAMPART PETROLEUM, INC.
By:
Name:
Title:
SECOND AMENDMENT TO CREDIT AGREEMENT - Page 9
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