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USA WINNER - GARY C. EVANS
DEAL: Penn Virginia to Acquire Eagle Ford Shale Assets from Magnum Hunter
NAME: Gary C. Evans COMPANY: Magnum Hunter Resources Corporation POSITION: Chairman & Chief Executive Officer TEL: 832-203-4600
INVESTOR RELATIONS: EMAIL: ir@magnumhunterresources.com
FIRM PROFILE
Gary C. Evans presently serves as Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources Corporation (NYSE: “MHR”), a Houston based oil and gas exploration and production company specializing in unconventional resource plays in North America where he has held that position since May 2009. Mr. Evans previously founded and served as the Chairman and Chief Executive Officer of Magnum Hunter Resources Inc. (MHRI), a NYSE listed company, for twenty years before selling MHRI to Cimarex Energy for approximately $2.2 billion in June 2005. In 2005, Mr. Evans formed Wind Hunter Energy, LLC, a renewable energy company which was subsequently acquired in December 2006 by GreenHunter Resources, Inc. (NYSE MKT: “GRH”), an emerging water resource company focusing on oil field water management and clean water technologies active in the unconventional resource plays. Mr. Evans has served as Chairman and Chief Executive Officer of GreenHunter Resources, Inc. since December 2006 and is currently Chairman. Mr. Evans serves as an Individual Trustee of TEL Offshore Trust, a publicly listed oil and gas trust, and is a Director of Novavax Inc., a NASDAQ listed clinical-stage vaccine biotechnology company. Mr. Evans was recognized by Ernst and Young as the Southwest Area 2004 Entrepreneur of the Year for the Energy Sector and was subsequently inducted into the World Hall of Fame for Ernst & Young Entrepreneurs. Mr. Evans was also recognized as the Energy Industry Leader of the year in 2013 and chosen by Finance Monthly in 2013 as one of the most respected CEO’s. Mr. Evans was chosen as the Best CEO in the “Large Company” category by Texas Top Producers in 2013. Mr. Evans serves on the Board of the Maguire Energy Institute at Southern Methodist University and speaks regularly at energy industry conferences around the world on the current affairs of the oil and gas business.
DEAL OVERVIEW Q
Please summarize the transaction?
An agreement to sell all of Magnum Hunter’s interest in the Company’s Eagle Ford Shale oil and gas properties located in Gonzales and Lavaca Counties of South Texas to a wholly-owned subsidiary of Penn Virginia Corporation ( NYSE:PVA) ( “Penn Virginia”) for a total purchase price of $401 million, was entered into on April 2, 2013.
The transaction was structured as a sale by Magnum Hunter of its 100% stock ownership interest in a wholly-owned subsidiary, Eagle Ford Hunter, Inc. Of the properties sold to Penn Virginia, there existed approximately 19,000 net mineral acres in this entity along with 49 producing wells, 7 wells drilled and in the completion stage and 4 wells that were drilling at the time. The total consideration for this transaction was approximately 90% ($361 million) in cash, and the remaining approximately 10% ($40 million) was paid in shares of common stock of Penn Virginia. Upon closing, Magnum Hunter used the net proceeds from
Q
How were the challenges or difficulties overcome?
When all legal issues finally were resolved, we were at an impasse over the final dollar amount of the total consideration due to a fluctuating sale price of Penn Virginia. This led to some last minute negotiations between the CEO’s of both companies which were ultimately completed successfully in the 9th hour of the transaction.
Q
How does the transaction fit with your overall business strategy?
By completely exiting a previously held strategic play where we held minimal lease acreage by our standards, and therefore had a limited future drilling inventory, this sale objective met our overall goal to exit this region. Additionally, the net proceeds from the transaction allowed our Company to significantly improve our overall liquidity position and gave us the ability to redeploy our sales proceeds to other regions where capital was needed to grow production.
Q
the transaction to reduce overall indebtedness, including borrowings under its Revolving Credit Facility and for other general corporate purposes.
Q Q What was your role within this transaction?
The ultimate decisions regarding the final details of the terms and conditions of the purchase and sale agreement along with the various forms of consideration and the final purchase price were ultimately decided by me and approved by our board of directors.
What were the challenges or difficulties you presented?
Since there was a significant stock component that was to be paid as consideration for this sale, insuring that the total purchase vale of the transaction met our minimum price hurdle objectives, which was $ 400 million or greater, was very important.
Q
What are your thoughts and predictions within your sector for 2014 and beyond?
2014 will be a challenging year for natural gas prices unless we have a severally cold winter. The amount of new gas coming into the marketplace, especially in the Marcellus and Utica Shale plays, will most likely exceed demand from the industrial and private sectors. Fortunately, this region of the country can continue to generate exceptional rates of return even in a $ 3.50 per mcf price environment for natural gas.
I also think you will see the Utica shale play become the most sought after unconventional shale play in the US during 2014 strictly due to economics.
What are your plans following the transaction?
To expedite additional lease purchases and expand our drilling efforts in the unconventional resource plays of the Marcellus, Utica, and Bakken. This will allow our Company to continue the production growth trajectory we are presently on for the next several years.
Deal Maker of the Year Awards 2013