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Wednesday, August 17, 2011

Magnum Hunter Closes Credit Facility for Eureka Hunter Pipeline

- Magnum Hunter Closes Credit Facility for Eureka Hunter Pipeline

Wednesday, August 17, 2011
Magnum Hunter Resources Corp.

Magnum Hunter's wholly-owned subsidiary, Eureka Hunter Pipeline, has closed a new credit facility totaling $150 million. The Eureka Hunter Finance Facility is comprised of two tranches: (i) a revolving credit facility in the aggregate principal amount of up to $100 million secured by a first lien on the assets of Eureka Hunter Pipeline ("Revolver") with an initial committed amount of $25 million; and (ii) a $50 million term loan secured by a second lien on such assets ("Term Loan"). All of the Term Loan must be drawn before any of the Revolver is drawn and $31 million of the Term Loan was drawn at closing yesterday. Both the Revolver and the Term Loan are "non-recourse" to the parent company, Magnum Hunter.

The proceeds from the Revolver and the Term Loan will be used to finance capital expenditures for the construction of the Eureka Hunter Pipeline system located in northern West Virginia and Ohio. Advances under the Term Loan will be limited to 60% of the project's "Total Capital" including equity and debt invested. As of August 15, 2011, Magnum Hunter has invested approximately $52 million of equity capital in the Eureka Hunter Pipeline project.

In addition, Magnum Hunter has received $21 million of net proceeds from the Term Loan Closing to repay existing indebtedness. As of August 16, 2011, Magnum Hunter had total liquidity including cash and availability under its credit facilities, including the Term Loan, of approximately $75 million, of which $55 million is available to fund its upstream capital program focused on the Company's high growth resource plays.

The applicable interest rate margin of the Revolver ranges from LIBOR plus 2.25% to LIBOR plus 3.50%. The Term Loan accrues interest at a rate of 12.50% per annum; of which 2.75% is payable in cash or Magnum Hunter restricted common stock at the sole option of Magnum Hunter. The Revolver and the Term Loan contain other terms and conditions customary for financings of this type. The Revolver has a maturity of five years from date of closing and the Term Loan has a maturity of seven years from date of closing. SunTrust Robinson Humphrey, Inc. has served as the "Lead Arranger" and SunTrust Bank will serve as "Administrative Agent" for the Revolver. PennantPark Investment Corporation is the "Lender" for the Term Loan.

Management Comments

Mr. Ronald D. Ormand, Executive Vice President and Chief Financial Officer of Magnum Hunter, commented, "The closing of the Eureka Hunter Finance Facility for the Eureka Hunter midstream assets completes one of our primary financial goals for fiscal year 2011. Eureka Hunter Pipeline now has its own primary source of financing, provided on a non-recourse basis to Magnum Hunter, and the capital necessary to complete construction and expand operations of the pipeline through fiscal year 2012. In addition, with the return of $21 million in capital from the Eureka Hunter Finance Facility, Magnum Hunter has further increased its overall financial liquidity to in excess of $75 million. The additional liquidity provides Magnum Hunter with the necessary capital to fund the Company's capital expenditure plan through the end of fiscal year 2011 and into fiscal year 2012."

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