x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 |
Delaware | 86-0879278 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered |
Common Stock, par value $.01 per share 10.25% Series C Cumulative Perpetual Preferred Stock 8.0% Series D Cumulative Preferred Stock Depositary Shares, each representing a 1/1,000 interest in a share of 8.0% Series E Cumulative Convertible Preferred Stock | NYSE NYSE MKT NYSE MKT NYSE MKT |
Large accelerated filer | x | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
1. | Financial Statements: The following consolidated financial statements of the Company and the Report of Independent Registered Public Accounting Firm are included in Part II, Item 8 of the Original 10-K: |
Report of Independent Registered Public Accounting Firm |
Consolidated Balance Sheets at December 31, 2014 and 2013 |
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 |
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2014, 2013, and 2012 |
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2014, 2013, and 2012 |
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012 |
Notes to the Consolidated Financial Statements |
2. | Financial Statement Schedules: Except for the consolidated financial statements of Eureka Hunter Holdings, LLC listed below, all financial statement schedules are omitted as inapplicable or because the required information is contained in the financial statements, or the notes thereto, included in the Original 10-K. |
Report of Independent Registered Public Accounting Firm |
Consolidated Balance Sheet at December 31, 2014 |
Consolidated Statement of Operations for the year ended December 31, 2014 |
Consolidated Statement of Changes in Members' Equity (Deficit) for the year ended December 31, 2014 |
Consolidated Statement of Cash Flows for the year ended December 31, 2014 |
Notes to the Consolidated Financial Statements |
3. | Exhibits: See the list of exhibits in the Index to Exhibits to this Amendment, which is incorporated by reference herein. |
MAGNUM HUNTER RESOURCES CORPORATION | |
By: | /s/ GARY C. EVANS |
Gary C. Evans | |
Chairman of the Board and Chief Executive Officer |
INDEX TO EXHIBITS | ||
Exhibit Number | Description | |
2.1+ | Arrangement Agreement between the Registrant and NGAS Resources, Inc., dated December 23, 2010 (incorporated by reference from the Registrant’s current report on Form 8-K filed on December 30, 2010). | |
2.2+ | Arrangement Agreement between the Registrant and NuLoch Resources Inc., dated January 19, 2011 (incorporated by reference from the Registrant’s current report on Form 8-K filed on January 25, 2011). | |
2.2.1+ | Plan of Arrangement under Section 193 of the Business Corporations Act (Alberta) with respect to the Acquisition of NuLoch Resources Inc. by the Registrant (incorporated by reference from the Registrant’s registration statement on Form S-4 filed on April 8, 2011). | |
2.3+ | Asset Purchase Agreement, dated March 21, 2012, by and among Eureka Hunter Holdings, LLC, TransTex Gas Services LP, and Eureka Hunter Acquisition Sub LLC (incorporated by reference from the Registrant’s current report on Form 10-Q filed on May 3, 2012). | |
2.3.1 | First Amendment to Asset Purchase Agreement, dated April 2, 2012, by and between Eureka Hunter Holdings, LLC, TransTex Gas Services, LP, and Eureka Hunter Acquisition Sub LLC (incorporated by reference from the Registrant’s quarterly report on Form 10-Q filed on May 3, 2012). | |
2.4+ | Purchase and Sale Agreement, dated as of April 17, 2012, by and between Baytex Energy USA Ltd. and Bakken Hunter, LLC (incorporated by reference from the Registrant’s current report on Form 8-K filed on April 24, 2012). | |
2.4.1 | First Amendment to Purchase and Sale Agreement, dated May 17, 2012, by and between Baytex Energy USA Ltd. and Bakken Hunter, LLC (incorporated by reference from the Registrant’s current report on Form 8-K filed on May 23, 2012). | |
2.4.2 | Second Amendment to Purchase and Sale Agreement, dated May 22, 2012, by and between Baytex Energy USA Ltd. and Bakken Hunter, LLC (incorporated by reference from the Registrant’s current report on Form 8-K filed on May 23, 2012). | |
2.5+ | Stock Purchase Agreement, dated as of October 24, 2012, by and among Triad Hunter, LLC, Viking International Resources Co., Inc., all of the stockholders of Viking International Resources Co., Inc., and solely for the purposes set forth therein, the Registrant (incorporated by reference from the Registrant’s current report on Form 8-K filed on October 30, 2012). | |
2.6+ | Purchase and Sale Agreement, dated as of November 21, 2012, between Samson Resources Company and Bakken Hunter, LLC (incorporated by reference from the Registrant’s current report on Form 8-K filed on November 28, 2012).+ | |
2.7+ | Stock Purchase Agreement, dated as of April 2, 2013, between the Registrant, Penn Virginia Oil & Gas Corporation, and Penn Virginia Corporation (incorporated by reference from the Registrant's current report on Form 8-K filed on April 8, 2013). | |
2.8+ | Asset Purchase Agreement, dated as of August 12, 2013, between Triad Hunter, LLC and MNW Energy, LLC (incorporated by reference from the Registrant's quarterly report on Form 10-Q filed on November 8, 2013). | |
2.9+ | Purchase and Sale Agreement, dated as of September 2, 2013, between Williston Hunter, Inc. and Oasis Petroleum of North America LLC (incorporated by reference from the Registrant's current report on Form 8-K filed on September 4, 2013).+ | |
2.10+ | Purchase and Sale Agreement, dated as of November 19, 2013, by and among PRC Williston, LLC, Williston Hunter ND, LLC and Enduro Operating LLC (incorporated by reference from the Registrant's current report on Form 8-K filed on November 22, 2013). | |
2.11+ | Purchase and Sale Agreement, dated January 21, 2013, among Shale Hunter, LLC, Magnum Hunter Resources Corporation, Magnum Hunter Production, Inc. and Energy Hunter Partners 2012-A Drilling & Production Fund, Ltd., New Standard Energy Texas LLC and New Standard Energy Limited (incorporated by reference from the Registrant's current report on Form 8-K filed on January 23, 2014). | |
2.11.1+ | Transition Services Agreement, dated January 28, 2014, between Shale Hunter, LLC and New Standard Energy Texas LLC (incorporated by reference from the Registrant's current report on Form 8-K filed on January 30, 2014). | |
2.12+ | Purchase and Sale Agreement, dated March 31, 2014, between Williston Hunter Canada, Inc. and BDJ Energy Inc. (incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2014). | |
2.13+ | Share Purchase Agreement, dated April 21, 2014, between the Registrant and Steppe Resources Inc. (incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2014). | |
2.14+@ | Transaction Agreement, dated September 15, 2014 (entered into on September 16, 2014), by and among Eureka Hunter Holdings, LLC, the Registrant, MSIP II Buffalo Holdings LLC (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on September 22, 2014). | |
2.14.1+ | Letter Agreement, dated November 18, 2014, by and among Eureka Hunter Holdings, LLC, the Registrant and MSIP II Buffalo Holdings, LLC (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on November 24, 2014). | |
2.15+ | Purchase and Sale Agreement, dated September 29, 2014, entered into on September 30, 2014, between Bakken Hunter, LLC and LGFE-BH L.P. (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on October 6, 2014). | |
2.16+ | Purchase and Sale Agreement, dated October 9, 2014, by and between Bakken Hunter, LLC and SM Energy Company (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on October 14, 2014). | |
3.1 | Restated Certificate of Incorporation of the Registrant, filed February 13, 2002 (incorporated by reference from the Registrant’s registration statement on Form SB-2 filed on March 21, 2006). | |
3.1.1 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed May 8, 2003 (incorporated by reference from the Registrant’s registration statement on Form SB-2 filed on March 21, 2006). | |
3.1.2 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed June 6, 2005 (incorporated by reference from the Registrant’s registration statement on Form SB-2 filed on March 21, 2006). | |
3.1.3 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed July 18, 2007 (incorporated by reference from the Registrant’s quarterly report on Form 10-QSB filed on August 14, 2007). | |
3.1.4 | Certificate of Ownership and Merger Merging Magnum Hunter Resources Corporation with and into Petro Resources Corporation, filed July 13, 2009 (incorporated by reference from the Registrant’s current report on Form 8-K filed on July 14, 2009). | |
3.1.5 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed November 3, 2010 (incorporated by reference from the Registrant’s current report on Form 8-K filed on November 2, 2010). | |
3.1.6 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed May 9, 2011 (incorporated by reference from the Registrant’s quarterly report on Form 10-Q filed on March 31, 2011). | |
3.1.7 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed June 29, 2011 (incorporated by reference from the Registrants registration statement on Form S-4 filed on January 14, 2013). | |
3.1.8 | Certificate of Amendment of Certificate of Incorporation of the Registrant, filed January 25, 2013 (incorporated by reference from Amendment No. 1 to the Registrant’s registration statement on Form S-4 filed on February 5, 2013). | |
3.2 | Amended and Restated Bylaws of the Registrant, dated March 15, 2001 as amended on April 14, 2006, and May 26, 2011 (incorporated by reference from the Registrant's quarterly report on Form 10-Q filed on August 9, 2011). | |
4.1 | Form of certificate for common stock (incorporated by reference from the Registrant’s annual report on Form 10-K filed on February 18, 2011). | |
4.2 | Certificate of Designation of Rights and Preferences of 10.25% Series C Cumulative Perpetual Preferred Stock, dated December 10, 2009 (incorporated by reference from the Registrant’s registration statement on Form 8-A filed on December 10, 2009). | |
4.2.1 | Certificate of Amendment of Certificate of Designation of Rights and Preferences of 10.25% Series C Cumulative Perpetual Preferred Stock, dated August 2, 2010 (incorporated by reference from the Registrant’s quarterly report on Form 10-Q filed on August 12, 2010). | |
4.2.2 | Certificate of Amendment of Certificate of Designation of Rights and Preferences of 10.25% Series C Cumulative Perpetual Preferred Stock, dated September 8, 2010 (incorporated by reference from the Registrant’s current report on Form 8-K filed on September 15, 2010). | |
4.3 | Certificate of Designation of Rights and Preferences of 8.0% Series D Cumulative Preferred Stock, dated March 16, 2011 (incorporated by reference from the Registrant’s current report on Form 8-K filed on March 17, 2011). | |
4.4 | Indenture, dated May 16, 2012, by and among the Registrant, the Guarantors named therein, Wilmington Trust, National Association and Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent (incorporated by reference from the Registrant’s current report on Form 8-K filed on May 16, 2012). | |
4.4.1 | First Supplemental Indenture, dated October 18, 2012, by and among the Registrant, the Guarantors named therein, Wilmington Trust, National Association, as Trustee, and Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent (incorporated by reference from the Registrant's registration statement on Form S-4 filed on January 14, 2013). | |
4.4.2 | Second Supplemental Indenture, dated December 13, 2012, by and among the Registrant, the Guarantors named therein, Wilmington Trust, National Association, as Trustee, and Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent (incorporated by reference from the Registrant's registration statement on Form S-4 filed on January 14, 2013). | |
4.4.3 | Third Supplemental Indenture, dated April 24, 2013, by and among the Registrant, the Guarantors named therein, Wilmington Trust, National Association, as Trustee, and Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent (incorporated by reference from the Registrant’s annual report on Form 10-K filed on June 14, 2013). | |
4.4.4 | Fourth Supplemental Indenture, dated July 23, 2013, by and among Shale Hunter, LLC, Wilmington Trust, National Association, as Trustee, and Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent (incorporated by reference from the Registrant’s quarterly report on Form 10-Q filed on August 9, 2013). | |
4.4.5 | Fifth Supplemental Indenture, dated January 27, 2014, by and among the Registrant, Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent, and Wilmington Trust, National Association, as Trustee (incorporated by reference from the Registrant's annual report on Form 10-K filed on March 2, 2015). | |
4.4.6 | Sixth Supplemental Indenture, dated November 10, 2014, by and among Bakken Hunter Canada, Inc., Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent, and Wilmington Trust, National Association, as Trustee (incorporated by reference from the Registrant's annual report on Form 10-K filed on March 2, 2015). | |
4.4.7 | Seventh Supplemental Indenture, dated December 4, 2014, by and among Triad Holdings, LLC, Citibank, N.A., as Paying Agent, Registrar and Authenticating Agent, and Wilmington Trust, National Association, as Trustee (incorporated by reference from the Registrant's annual report on Form 10-K filed on March 2, 2015). | |
4.5 | Certificate of Designations of Rights and Preferences of the 8.0% Series E Cumulative Convertible Preferred Stock of the Registrant, dated November 2, 2012 (incorporated by reference from the Registrant’s current report on Form 8-K filed on November 8, 2012). | |
4.6 | Deposit Agreement, dated as of November 2, 2012, by and among the Registrant, American Stock Transfer & Trust Company, as Depositary, and the holders from time to time of the depositary receipts described therein (incorporated by reference from the Registrant’s current report on Form 8-K filed on November 8, 2012). | |
10.1* | Amended and Restated Stock Incentive Plan of Registrant (incorporated by reference from the Registrant’s current report on Form 8-K filed on December 3, 2010). | |
10.1.1* | First Amendment to Amended and Restated Stock Incentive Plan (incorporated by reference from the Registrant’s proxy statement on Annex C of Schedule 14A filed on April 1, 2011). | |
10.1.2 | Second Amendment to the Magnum Hunter Resources Corporation Amended and Restated Stock Incentive Plan (incorporated by reference from the Registrant’s registration statement on Form S-8 filed on February 14, 2013). | |
10.1.3* | Third Amendment to the Magnum Hunter Resources Corporation Amended and Restated Stock Incentive Plan (incorporated by reference from the Registrant’s current report on Form 8-K filed on January 23, 2013). | |
10.2* | Form of Stock Option Agreement under the Registrant’s Amended and Restated Stock Incentive Plan (incorporated by reference from the Registrant’s annual report on Form 10-K filed on February 18, 2011). | |
10.3* | Form of Restricted Stock Award Agreement under the Registrant’s Amended and Restated Stock Incentive Plan (incorporated by reference from the Registrant’s current report on Form 8-K filed on December 3, 2010). | |
10.4* | Form of Stock Appreciation Right Agreement under the Registrant’s Amended and Restated Stock Incentive Plan (incorporated by reference from the Registrant’s current report on Form 8-K filed on December 3, 2010). | |
10.5* | Form of Executive Change of Control Retention Agreements (incorporated by reference from the Registrant’s annual report on Form 10-K filed on February 29, 2012). | |
10.5.1* | Amendment to Form of Executive Change of Control Retention Agreements (incorporated by reference from the Registrant’s annual report on Form 10-K filed on February 29, 2012). | |
10.6* | Form of Indemnification Agreement for Directors (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on June 7, 2013). | |
10.7* | Form of Indemnification Agreement for Officers (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on June 7, 2013). | |
10.8 | Omnibus Settlement Agreement and Release, dated as of January 9, 2014, by and among the Registrant, Magnum Hunter Production, Inc., Eureka Hunter Pipeline, LLC, Seminole Energy Services, L.L.C., Seminole Gas Company, L.L.C., Seminole Murphy Liquids Terminal, L.L.C., NGAS Gathering II, LLC, and NGAS Gathering, LLC (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on January 14, 2014). | |
10.9 | Securities Purchase Agreement, dated as of March 20, 2014, by and among the Registrant and investors party thereto (incorporated by reference from the Registrant’s registration statement on Form S-1 filed on March 31, 2014). | |
10.10 | Registration Rights Agreement, dated as of March 20, 2014, by and among the Registrant and investors party thereto (incorporated by reference from the Registrant’s registration statement on Form S-1 filed on March 31, 2014). | |
10.11 | Credit Agreement, dated March 28, 2014, by and among Eureka Hunter Pipeline, LLC, as borrower, ABN AMRO Capital USA, LLC, as lender and administrative agent, and the other lenders party thereto (incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2014). | |
10.11.1 | First Amendment to Credit Agreement, dated as of November 19, 2014, by and among Eureka Hunter Pipeline, LLC, ABN AMRO Capital USA, LLC, as administrative agent, and the lenders party thereto (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on November 24, 2014). | |
10.12* | Eureka Hunter Holdings, LLC Management Incentive Compensation Plan (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 16, 2014). | |
10.12.1* | Form of Eureka Hunter Holdings, LLC Equity Incentive Plan Award Letter (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 16, 2014). | |
10.12.2* | Form of Eureka Hunter Holdings, LLC Class B Common Unit Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 16, 2014). | |
10.13 | Securities Purchase Agreement, dated as of May 27, 2014, by and among the Registrant and investors party thereto (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 30, 2014). | |
10.14 | Registration Rights Agreement, dated as of May 27, 2014, by and among the Registrant and investors party thereto (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 30, 2014). | |
10.15 | Form of Warrant to Purchase Shares of Common Stock of the Registrant (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 30, 2014). | |
10.16@ | Second Amended and Restated Limited Liability Company Agreement of Eureka Hunter Holdings, LLC, dated October 3, 2014, by and among Eureka Hunter Holdings, LLC, the Registrant, MSIP II Buffalo Holdings, LLC, and certain other limited liability company members (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on October 9, 2014). | |
10.17 | Fourth Amended and Restated Credit Agreement, dated October 22, 2014, by and among the Registrant, Bank of Montreal, the lenders party thereto and the agents party thereto (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on October 28, 2014). | |
10.17.1 | First Amendment to Credit Agreement and Limited Waiver, dated February 24, 2015, by and among the Registrant, the guarantors party thereto, the lenders party thereto and Bank of Montreal (incorporated by reference from the Registrant's annual report on Form 10-K filed on March 2, 2015). | |
10.18 | Second Lien Credit Agreement, dated October 22, 2014, by and among the Registrant, Credit Suisse AG, Cayman Islands Branch, the lenders party thereto and the agents party thereto (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on October 28, 2014). | |
10.19*## | Letter Agreement, dated January 29, 2015, by and between the Registrant and R. Glenn Dawson. | |
10.20## | Release and Confidentiality Agreement, dated January 29, 2015, by and between the Registrant and R. Glenn Dawson. | |
12.1## | Computation of Ratio of Earnings to Fixed Charges. | |
21.1## | List of Subsidiaries. | |
23.1## | Consent of BDO USA, LLP with respect to the consolidated financial statements of Magnum Hunter Resources Corporation. | |
23.2## | Consent of Cawley Gillespie & Associates, Inc. | |
23.3# | Consent of BDO USA, LLP with respect to the consolidated financial statements of Eureka Hunter Holdings, LLC. | |
31.1# | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2# | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1^ | Certification of the Chief Executive Officer and Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
99.1## | Independent Engineer Reserve Report for the year ended December 31, 2014 prepared by Cawley Gillespie & Associates, Inc. | |
99.2# | Consolidated financial statements of Eureka Hunter Holdings, LLC as of and for the year ended December 31, 2014. | |
101.INS## | XBRL Instance Document. | |
101.SCH## | XBRL Taxonomy Extension Schema Document. | |
101.CAL## | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB## | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE## | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF## | XBRL Taxonomy Extension Definition Presentation Linkbase Document. |
* | The referenced exhibit is a management contract, compensatory plan or arrangement. | |
+ | The schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the SEC upon request. | |
@ | Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the SEC. | |
# | Filed herewith. | |
## | Filed with the Original 10-K. | |
^ | This exhibit is furnished herewith and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. |
1. | I have reviewed this annual report on Form 10-K/A of the Company; |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 12, 2015 | ||
By: | /s/ Gary C. Evans | |
Gary C. Evans, | ||
Chairman and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K/A of the Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 12, 2015 | ||
By: | /s/ Joseph C. Daches | |
Joseph C. Daches, | ||
Chief Financial Officer |
March 12, 2015 |
/s/ Gary C. Evans |
Gary C. Evans, |
Chairman and Chief Executive Officer |
March 12, 2015 |
/s/ Joseph C. Daches |
Joseph C. Daches, |
Chief Financial Officer |
Report of Independent Registered Public Accounting Firm | 1 | ||||
Consolidated Balance Sheet at December 31, 2014 | 2 | ||||
Consolidated Statement of Operations for the year ended December 31, 2014 | 3 | ||||
Consolidated Statement of Changes in Members' Equity (Deficit) for the year ended December 31, 2014 | 4 | ||||
Consolidated Statement of Cash Flows for the year ended December 31, 2014 | 5 | ||||
Notes to Consolidated Financial Statements | 6 |
December 31, 2014 | |||||
CURRENT ASSETS: | |||||
Cash and cash equivalents | $ | 6,380 | |||
Accounts receivable, net of valuation allowance of $93 | 4,079 | ||||
Accounts receivable - related party | 4,568 | ||||
Inventory | 1,040 | ||||
Prepaid expenses | 1,046 | ||||
Total current assets | 17,113 | ||||
PROPERTY AND EQUIPMENT, NET | 439,046 | ||||
OTHER ASSETS: | |||||
Deferred financing costs, net of accumulated amortization of $490 | 1,682 | ||||
Other assets | 198 | ||||
Intangible assets, net of accumulated amortization of $5,969 | 4,524 | ||||
Total other assets | 6,404 | ||||
Total assets | $ | 462,563 | |||
CURRENT LIABILITIES: | |||||
Accounts payable | $ | 45,447 | |||
Accounts payable - related party | 2,913 | ||||
Accrued expenses | 1,150 | ||||
Accrued expenses - related party | 500 | ||||
Accrued sales tax payable | 11,691 | ||||
Deferred revenue - current | 1,616 | ||||
Total current liabilities | 63,317 | ||||
Long term debt | 100,000 | ||||
Deferred revenue - long term | 37 | ||||
Total liabilities | 163,354 | ||||
Commitments & Contingencies (Note 10) | |||||
MEMBERS’ EQUITY: | |||||
Series A-1 Units, 13,729,849 units issued and outstanding as of December 31, 2014 (Notes 7 and 8) | 387,962 | ||||
Series A-2 Units, 13,640,593 units issued and outstanding as of December 31, 2014 (Notes 7 and 8) | 484,236 | ||||
Additional contributed capital | (358,246 | ) | |||
Accumulated deficit | (214,743 | ) | |||
Total members’ equity | 299,209 | ||||
Total liabilities and members’ equity | $ | 462,563 |
For the Year Ended December 31, 2014 | |||||
REVENUE: | |||||
Gas gathering revenue | $ | 20,505 | |||
Gas gathering revenue - related party | 14,230 | ||||
Equipment rental and service revenue | 9,009 | ||||
Equipment sales revenue | 720 | ||||
Total revenue | 44,464 | ||||
OPERATING EXPENSES: | |||||
Gas gathering expense | 12,826 | ||||
Equipment rental and service expense | 5,114 | ||||
Depreciation and amortization | 16,421 | ||||
General and administrative expense | 15,004 | ||||
Gain on sale of assets | (12 | ) | |||
Loss on impairment | 799 | ||||
Total expenses | 50,152 | ||||
OPERATING LOSS | (5,688 | ) | |||
OTHER EXPENSE: | |||||
Interest expense, net of amounts capitalized | (7,359 | ) | |||
Loss on embedded derivative | (91,792 | ) | |||
Loss on equity method investment | (350 | ) | |||
Total other expense | (99,501 | ) | |||
Net loss | (105,189 | ) | |||
Preferred dividends | (19,343 | ) | |||
Loss on extinguishment of Series A Preferred Units | (51,692 | ) | |||
Net loss attributable to common unit holders | $ | (176,224 | ) |
Series A Common Units | Series A Common | Series A-1 Units | Series A-1 | Series A-2 Units | Series A-2 | Additional Contributed Capital | Accumulated Deficit | Total Members' Equity (Deficit) | ||||||||||||||||||
Balance at December 31, 2013 | 13,847,093 | $ | 367,843 | — | $ | — | — | $ | — | $ | (310,235 | ) | $ | (90,211 | ) | $ | (32,603 | ) | ||||||||
Issued Series A Common Units upon cash contribution from MHR | 2,755,976 | 55,120 | — | — | — | — | — | — | 55,120 | |||||||||||||||||
Issued Series A Common Units for cash | 409,024 | 8,180 | — | — | — | — | — | — | 8,180 | |||||||||||||||||
Issued Series A Preferred Units in payment of preferred distributions paid-in-kind (Note 7) | (97,492 | ) | — | — | — | — | — | — | (1,950 | ) | (1,950 | ) | ||||||||||||||
Issued Series A Preferred Units for cash, net of costs (Note7) | (610,000 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||
Contributions | — | — | — | — | — | — | 6,568 | — | 6,568 | |||||||||||||||||
Distributions | — | — | — | — | — | — | (41 | ) | — | (41 | ) | |||||||||||||||
Preferred unit distributions and accretion | — | — | — | — | — | — | — | (17,393 | ) | (17,393 | ) | |||||||||||||||
Distribution of property to MHR | — | — | — | — | — | — | (2,846 | ) | — | (2,846 | ) | |||||||||||||||
Conversion of Series A Common Units to Series A-1 and Series A-2 Units (Note 7) | (16,304,601 | ) | (431,143 | ) | 15,895,577 | 422,962 | 409,024 | 8,181 | — | — | — | |||||||||||||||
Conversion of Series A Preferred Units to Series A-2 Units (Note 7) | — | — | — | 10,592,540 | 381,055 | (51,692 | ) | — | 329,363 | |||||||||||||||||
Issued Series A-1 Units for cash | — | — | 566,828 | 20,000 | — | — | — | — | 20,000 | |||||||||||||||||
Issued Series A-2 Units for cash | — | — | — | 1,133,655 | 40,000 | — | — | 40,000 | ||||||||||||||||||
MHR capital adjustment (Note 8) | — | — | (1,227,182 | ) | — | — | — | — | — | — | ||||||||||||||||
Purchase by MSI of 5.5% interest from MHR (Note 8) | — | — | (1,505,374 | ) | (55,000 | ) | 1,505,374 | 55,000 | — | — | — | |||||||||||||||
Net loss | — | — | — | — | — | — | — | (105,189 | ) | (105,189 | ) | |||||||||||||||
Balance at December 31, 2014 | — | $ | — | 13,729,849 | $ | 387,962 | 13,640,593 | $ | 484,236 | $ | (358,246 | ) | $ | (214,743 | ) | $ | 299,209 |
For the Year Ended December 31, 2014 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net loss | $ | (105,189 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||
Depreciation and amortization | 16,421 | ||||
Amortization and write-off of deferred financing costs | 3,240 | ||||
Impairment of assets | 799 | ||||
Gain on the sale of assets | (12 | ) | |||
Loss on embedded derivative | 91,792 | ||||
Loss on equity method investment | 350 | ||||
Bad debt expense | 93 | ||||
Allocated general and administrative expense | 6,526 | ||||
Changes in operating assets and liabilities: | |||||
Accounts receivable | (401 | ) | |||
Accounts receivable - related party | (2,837 | ) | |||
Inventory | (98 | ) | |||
Prepaid expenses | (527 | ) | |||
Other assets | 18 | ||||
Accounts payable | (10,807 | ) | |||
Accrued expenses | 1,070 | ||||
Accounts payable and accrued expenses - related party | 1,340 | ||||
Deferred revenue | 113 | ||||
Net cash provided by operating activities | 1,891 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Cash paid for property and equipment | (176,726 | ) | |||
Proceeds from the sale of assets | 34 | ||||
Net cash used in investing activities | (176,692 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Borrowing of notes payable | 100,000 | ||||
Repayments on notes payable | (50,000 | ) | |||
Cash paid for deferred financing costs | (2,172 | ) | |||
Issuance of Series A Preferred units, net of costs | 11,956 | ||||
Preferred distributions paid | (10,238 | ) | |||
Issuance of Series A Common units | 63,300 | ||||
Issuance of Series A-1 units | 20,000 | ||||
Issuance of Series A-2 units | 40,000 | ||||
Net cash provided by financing activities | 172,846 | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS: | (1,955 | ) | |||
Cash and cash equivalents, beginning of period | 8,335 | ||||
Cash and cash equivalents, end of period | $ | 6,380 | |||
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||
Cash paid for interest | $ | 3,314 | |||
Change in accrued capital expenditures | $ | 42,650 | |||
Distribution of net assets to MHR | $ | 2,846 | |||
Issued Series A Preferred units in payment of preferred distribution paid-in-kind | $ | 1,950 | |||
Exchange of Series A-2 units for redeemable preferred stock and embedded derivative liability | $ | 381,055 |
• | Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable; |
(in thousands) | ||||
Fair value at beginning of period | $ | (75,934 | ) | |
Issuance of redeemable preferred stock | (5,479 | ) | ||
Increase in fair value recognized in loss on derivative contracts | (91,792 | ) | ||
Extinguishment upon conversion of the Company's Series A Preferred Units to Series A-2 Units (see Note 7) | 173,205 | |||
Fair value at end of period | $ | — |
(Level 1) | (Level 2) | (Level 3) | ||||||||
(in thousands) | ||||||||||
Fair value of Long-lived assets of TransTex | $ | — | $ | — | $ | 315 | ||||
Fair value of equity-method investments impaired | — | — | — | |||||||
Series A-2 Units | — | — | 389,236 | |||||||
Total during the year ended December 31, 2014 | $ | — | $ | — | $ | 389,551 |
Amortization Period | December 31, 2014 | ||||||
(in thousands) | |||||||
Customer relationships | $ | 5,434 | |||||
Trademark | 859 | ||||||
Existing contracts | 4,199 | ||||||
Total intangible assets | 10,492 | ||||||
Accumulated amortization: | |||||||
Customer relationships | 12.5 years | (1,880 | ) | ||||
Trademark | 11.0 years | (215 | ) | ||||
Existing contracts | 3.0 years | (3,873 | ) | ||||
Intangible assets, net of accumulated amortization | $ | 4,524 |
(in thousands) | ||||
2015 | $ | 981 | ||
2016 | 586 | |||
2017 | 519 | |||
2018 | 457 | |||
2019 | 404 | |||
Thereafter | 1,577 | |||
$ | 4,524 |
Estimated Useful Life (Years) | 2014 | ||||||
In thousands | |||||||
Pipeline gas gathering equipment | 5 - 40 | $ | 203,111 | ||||
Processing plant and equipment | 5 - 20 | 25,580 | |||||
Land and rights of way | — | 33,235 | |||||
Construction in progress | — | 203,697 | |||||
Buildings | 40 | 1,412 | |||||
Other | 5 - 10 | 2,293 | |||||
Total | 469,328 | ||||||
Accumulated depreciation | (30,282 | ) | |||||
Property and equipment, net | $ | 439,046 |
• | on base rate loans, at the per annum rate equal to the sum of (A) the base rate (defined as the highest of (i) the per annum rate of interest established by JPMorgan Chase Bank, N.A. as its prime rate for U.S. dollar loans, (ii) the Adjusted Eurodollar Rate (as defined in the credit agreement) for an interest period of one-month, plus 1.0%, or (iii) the federal funds rate, plus 0.50% per annum), and (B) a margin of 1.0% to 2.50% per annum; or |
• | on Eurodollar Loans, at the per annum rate equal to the sum of (A) the Eurodollar Rate (as defined in the credit agreement) adjusted for certain statutory reserve requirements for Eurocurrency liabilities, and (B) a margin of 2.0% to 3.50% per annum. |
• | a maximum leverage ratio (defined as the ratio of (i) consolidated funded debt to (ii) annualized consolidated EBITDA), as of the end of each fiscal quarter, not greater than (A) 4.75 to 1.00 for the fiscal quarters ending March 31, 2014 through September 30, 2014, and (B) 4.50 to 1.00 for the fiscal quarter ending December 31, 2014 and each fiscal quarter ending thereafter; and |
• | a minimum interest coverage ratio (defined as the ratio of (i) annualized consolidated EBITDA to (ii) annualized consolidated interest charges for such period), as of the end of each fiscal quarter, not less than (A) 2.75 to 1.00 for the fiscal quarters ending March 31, 2014 through September 30, 2014, and (B) 2.50 to 1.00 for the fiscal quarter ending December 31, 2014 and each fiscal quarter ending thereafter. |
In thousands | 2014 | ||||
Interest expense on long-term debt | 6,057 | ||||
Interest expense from amortization of deferred financing costs | 426 | ||||
Interest expense from write-off of unamortized deferred financing costs | 2,814 | ||||
Less: interest expense capitalized | (1,938 | ) | |||
Total interest expense, net of amounts capitalized | 7,359 |
Series A Preferred Units | Series A Preferred Units | ||||||
(in thousands) | |||||||
Balance at December 31, 2013 | 9,885,048 | $ | 136,675 | ||||
Issued Series A Preferred Units in payment of preferred distributions paid-in-kind | 97,492 | 1,208 | |||||
Issued Series A Preferred Units for cash, net of costs | 610,000 | 7,219 | |||||
Accretion on Series A Preferred Units | — | 6,583 | |||||
Conversion of Series A Preferred Units to Series A-2 Units | (10,592,540 | ) | (151,685 | ) | |||
Balance at December 31, 2014 | — | $ | — |
i. | In connection with certain of the Company’s capital projects for fiscal year 2014, on November 20, 2014, MSI made a $30.0 million capital contribution in cash to the Company in exchange for additional Series A-2 Units. |
ii. | On November 20, 2014, Magnum Hunter made a $20.0 million capital contribution in cash to the Company in exchange for additional Series A-1 Units. |
iii. | In addition, in connection with a closing that occurred on December 18, 2014, MSI made a $10.0 million capital contribution in cash to the Company in exchange for additional Series A-2 Units. |
iv. | The Second Closing was accelerated to the date of closing of MSI’s capital contribution referred to in item (iii) above, and, pursuant to the accelerated closing, Magnum Hunter sold to MSI 5.5% of its Series A-1 Units (reduced from the amount originally provided to be sold to MSI at the Second Closing under the Transaction Agreement) for $55.0 million in cash (correspondingly reduced from the amount originally provided to be received by Magnum Hunter from MSI at the Second Closing). The Series A-1 Units sold to MSI by Magnum Hunter were converted into Series A-2 Units upon receipt by MSI on a one-for-one basis, as provided in the Transaction Agreement and the New LLC Agreement. |
v. | Magnum Hunter has also agreed to make a $13.3 million capital contribution in cash to the Company on or before March 31, 2015 in exchange for additional Series A-1 Units. However, Magnum Hunter and MSI subsequently entered into discussions regarding the Company's 2015 capital expenditure budget, including the amount, timing and expected funding of the various anticipated capital expenditures. Magnum Hunter anticipates that, as a result of these discussions, the parties will determine the priority, timing and (to the extent not funded by operating cash flows or borrowings) allocation between the parties of the funding of the anticipated expenditures that will most effectively serve the 2015 project plans of the Company. Magnum Hunter also anticipates that, as part of these determinations, MSI will make the $13.3 million cash capital contribution referred to above in exchange for additional Series A-2 Units under the terms of the carried interest provisions discussed below. |
(in thousands) | 2015 | 2016 | 2017 | 2018 | Total | |||||||||||
Long-term debt (1) | $ | — | $ | — | $ | — | 100,000 | 100,000 | ||||||||
Interest on long-term debt (2) | 2,670 | 2,670 | 2,670 | 645 | 8,655 | |||||||||||
Gas compression agreements (3) | 2,038 | 1,527 | 83 | — | 3,648 | |||||||||||
Total | $ | 4,708 | $ | 4,197 | $ | 2,753 | $ | 100,645 | $ | 112,303 | ||||||
(1) See Note 6 - "Credit Facilities" to the Company's consolidated financial statements. | ||||||||||||||||
(2) Interest payments have been calculated by applying the interest rate in effect as of December 31, 2014 to the outstanding debt balance as of December 31, 2014. | ||||||||||||||||
(3) Amounts relate to the rental of multiple compressor units by the Company, which are accounted for as operating leases. On June 27, 2012, the Company entered into a master services agreement allowing for the rental of individual compressors with varying monthly payments and lease terms. |
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