Magnum Hunter Resources Corp. announced today a three-year, senior secured, revolving credit facility with the Bank of Montreal (BMO). This new $150 million bank facility will be regulated via a semi-annual redetermination of its borrowing base, whose value will be allocated to MHR’s proved crude oil and natural gas reserves.
MHR, and its subsidiaries, is an independent oil and natural gas exploration and production company based in Houston, Texas. Focused on leveraging the expertise of its management team to create maximal value for its shareholders, MHR enjoys an annual ROI of approximately 37%. The price of shares jumped 11% in early trading this morning on news of the commitment of the new bank facility.
With an initial sum of $25M in borrowing based on the market value of its crude oil and natural gas assets, which may be realized through acquisition or discovery as time progresses, a commitment ceiling of $150M to its borrowing base has been established.
The interest rate margin for this new facility will be LIBOR plus 2.5 -3%, depending on the amount of borrowings outstanding at any given time, with typical terms and conditions for such a bank borrowing facility applied otherwise. The SEC filings, including terms and covenants specific to the final agreement which will regulate MHR’s new bank facility, will be posted at the closing, anticipated for Nov. 15.
BMO will occupy the roles of Administrative Agent, Lead Arranger, and Runner of the Books for the new facility. A relationship hailed by Executive VP and CFO for MHR, Ronald D. Ormand, as a “testament to senior management’s track record with the banking industry”. Ormand went on to say that “this new $150 million revolving credit facility” would underwrite the Company’s growth strategy, confidently asserting that “the work performed by the senior credit officers at the Bank of Montreal to put this new lending facility into place during a difficult period in the overall financial markets”, signified that MHR would “move forward on the growth and acquisition efforts we initiated several months ago”.
With the recent acquisition of Sharon Resources Inc. in September of this year, MHR will now be able to exploit the new credit facility to, as Ormand put it, “make accretive oil and gas property acquisitions to enhance shareholder value”.