UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 


 

Date of Report (Date of earliest event reported):

June 10, 2014 (June 9, 2014)

 


 

MAGNUM HUNTER RESOURCES CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

(State or Other Jurisdiction of
Incorporation)

 

001-32997

(Commission File Number)

 

86-0879278

(I.R.S. Employer Identification
Number)

 

777 Post Oak Boulevard, Suite 650

Houston, Texas 77056

(Address of principal executive offices, including zip code)

 

(832) 369-6986

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 1.01              Entry into a Material Definitive Agreement.

 

On June 9, 2014, Magnum Hunter Resources Corporation (the “Company”, “we”, “us” or “our”) entered into a Limited Consent Agreement related to the Company’s Third Amended and Restated Credit Agreement, by and among the Company, as borrower, Bank of Montreal, as administrative agent, the lenders party thereto and the agents party thereto, dated December 13, 2013, as amended, to allow the Company to consummate the takeover offer described in Item 8.01 below. A copy of the Limited Consent Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

 

Item 8.01              Other Events.

 

On June 10, 2014, the Company filed with the Australian Securities Exchange a notice of intention to make a takeover offer (the “Notice”) for Ambassador Oil and Gas Limited, an Australian company listed on the Australian Securities Exchange (ASX: AQO) (“Ambassador”), stating that the Company intends to make an offer to acquire all of the outstanding ordinary (or common) shares of Ambassador. The consideration set forth in the Company’s Notice is one share of the Company’s common stock for every 27.8 Ambassador shares, implying a value of A$0.34 per Ambassador share based on the closing sales price of the Company’s common stock on the New York Stock Exchange of US$8.84 on Monday, June 9, 2014. Ambassador currently has approximately 142.1 million shares outstanding. At the offer ratio, the Company plans to issue approximately 5.1 million shares of common stock in order to acquire 100% of Ambassador, equivalent to approximately 2.6% of the Company’s outstanding shares of common stock as of June 9, 2014. Based on the closing sales price of the Company’s common stock on the New York Stock Exchange of US$8.84 on Monday, June 9, 2014, this represents total consideration of approximately US$45.2 million. Ambassador shareholders will own approximately 2.5% of the outstanding shares of common stock of the Company as of June 9, 2014 (and pro forma for the issuance of shares pursuant to the Company’s offer) if the Company acquires 100% of Ambassador. The Company’s offer is subject to certain terms and conditions which are summarized in Schedule 1 to the Notice. A copy of the Notice, including Schedule 1, is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The full terms and conditions of the Company’s offer will be set forth in a Bidder’s Statement which the Company expects to deliver to Ambassador shareholders as soon as possible.

 

As previously reported by the Company, the Company owns approximately 17% of the ordinary (or common) shares of New Standard Energy Limited, an Australian company listed on the Australian Securities Exchange (ASX: NSE) (“NSE”), the joint venture partner of Ambassador in Petroleum Exploration License No. 570 (“PEL 570”) issued by the government of South Australia for the exploration of oil and natural gas in the Cooper Basin in South Australia. The Company acquired its equity position in NSE in connection with the sale by the Company of certain of its Eagle Ford Shale properties to NSE in January 2014.  In connection with such sale, the Company and NSE agreed to a strategic alliance whereby the Company agreed to provide technical advice and assistance to NSE in connection with its development activities in PEL 570, specifically the development of the unconventional shale gas potential of the lands covered by PEL 570.

 

PEL 570 is made up of five parcels of acreage which total approximately 2,400 square kilometers (approximately 593,000 acres) in the South Australian portion of the Cooper Basin. The work program for PEL 570 currently consists of seismic acquisition and the drilling of three wells over the five-year term of the license. NSE has acquired the right to earn a 52.5% working interest in PEL 570 pursuant to a farm out from Ambassador, which owns the remaining 47.5% working interest in PEL 570. The Notice contains additional summary information regarding Ambassador and PEL 570.

 

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The Company believes the offer for Ambassador represents an attractive opportunity for the Company to consolidate 100% of the working interests in PEL 570 in companies in which the Company owns a controlling or significant interest, thereby helping to facilitate the exploration and development of the Cooper Basin acreage. The Board of Directors and management team of the Company recently made a decision to increase the Company’s exposure to a very specific region in Australia where the Company has already established a presence. The Company’s decision was made based upon a combination of factors, which include the following:  (i) geological interpretation; (ii) substantial land position (shale scale); (iii) existing infrastructure; (iv) gas price and immediate exposure to international takeaway markets; (v) and most importantly, significant upside potential for our shareholders. The Company is not budgeting any cash expenditures surrounding this investment in Australia for calendar year 2014. The Company believes that the knowledge we have gained over the past five years in successfully exploring the Eagle Ford, Bakken, Marcellus and Utica Shale Plays is transferrable to the Cooper Basin of Australia.  Based on our exposure to shale plays in the United States, we believe early movers have the greatest opportunity for eventual success.

 

Notice to U.S. Shareholders of Ambassador. The offer described in this report is for the securities of a non-U.S. company. The offer is subject to disclosure requirements of a country that are different from those of the United States. You should be aware that the offeror may purchase securities otherwise than under the offer, such as in open market or privately negotiated purchases.

 

Item 9.01              Financial Statements and Exhibits.

 

(d)          Exhibits

 

Exhibit
Number

 

Description

10.1

 

Limited Consent Agreement, dated June 9, 2014

99.1

 

Intention to Make a Takeover Offer for Ambassador Oil and Gas Limited, dated June 10, 2014.

 

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

This current report on Form 8-K includes “forward-looking statements” as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in this current report and other filings made by us with the SEC. Among the factors that could cause results to differ materially are those risks discussed in this and other reports filed by us with the SEC. You are urged to carefully review and consider the cautionary statements and other disclosures made in this and those filings, specifically those under the heading “Risk Factors.” Forward-looking statements speak only as of the date of the document in which they are contained, and we do not undertake any duty to update any forward-looking statements except as may be required by law.

 

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SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

MAGNUM HUNTER RESOURCES CORPORATION

 

 

Date: June 10, 2014

/s/ Gary C. Evans

 

Gary C. Evans,

 

Chairman and Chief Executive Officer

 

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INDEX TO EXHIBITS

 

Exhibit
Number

 

Description

10.1

 

Limited Consent Agreement, dated June 9, 2014

99.1

 

Intention to Make a Takeover Offer for Ambassador Oil and Gas Limited, dated June 10, 2014.

 

5



EXHIBIT 10.1

 

LIMITED CONSENT

 

THIS LIMITED CONSENT (this “Consent”), effective as of the 9th day of June, 2014 (the “Effective Date”), is entered into by and among MAGNUM HUNTER RESOURCES CORPORATION, a Delaware corporation (the “Borrower”), the guarantors party hereto (the “Guarantors”), each of the Lenders (as hereinafter defined) party hereto and BANK OF MONTREAL, as administrative agent for the Lenders (the “Administrative Agent”).

 

RECITALS

 

WHEREAS, the Borrower, the lenders party thereto (the “Lenders”) and the Administrative Agent entered into that certain Third Amended and Restated Credit Agreement dated as of December 13, 2013 (as amended prior to the date hereof, the “Credit Agreement”);

 

WHEREAS, the Borrower has advised the Administrative Agent and the Lenders that it is contemplating making a tender offer for all of the Equity Interests of Ambassador Oil and Gas Ltd., a company formed under the laws of Australia (“Ambassador”), the consideration for which offer (the “Ambassador Offer”) will consist solely of the common Equity Interests of the Borrower;

 

WHEREAS, the Borrower has further advised the Administrative Agent and the Lenders that, in connection with the Ambassador Offer, it intends to form a new Foreign Subsidiary to be designated as an Unrestricted Subsidiary (the “New Foreign Subsidiary”) that will own the Equity Interests of Ambassador in the event the Ambassador Offer is consummated;

 

WHEREAS, the Borrower has requested that the Lenders consent to the Investment contemplated by the Ambassador Offer, the formation of the New Foreign Subsidiary and the acquisition and expenditure, through and to the extent of the consummation of the Ambassador Offer, in or related to Oil and Gas Properties not located within the geographical boundaries or territorial waters of the United States or Canada, in each case, notwithstanding certain provisions in the Credit Agreement to the contrary;

 

WHEREAS, said parties are willing to so consent and agree subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set forth in this Consent, the Borrower, the Guarantors, the Lenders and the Administrative Agent agree as follows:

 

1.                                      Defined Terms.  Unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Credit Agreement.

 

2.                                      Limited Consent.  Notwithstanding Sections 9.05, 9.06 and 9.14 of the Credit Agreement to the contrary, subject to the terms and conditions set forth herein, the Lenders hereby consent to:

 



 

(a)                                 the Investment contemplated by the Ambassador Offer; provided that the consideration for such Investment consists solely of the common Equity Interests of the Borrower;

 

(b)                                 the formation of the New Foreign Subsidiary; provided that the Borrower shall not be permitted to designate the New Foreign Subsidiary or Ambassador as a Restricted Subsidiary without the prior written consent of the Administrative Agent and the Required Lenders; and

 

(c)                                  the acquisition and expenditure, through and to the extent of the consummation of the Ambassador Offer, in or related to Oil and Gas Properties not located within the geographical boundaries or territorial waters of the United States or Canada to the limited extent Ambassador owns such Oil and Gas Properties and not otherwise.

 

3.                                      Agreement Regarding the Security Agreement.  Notwithstanding anything contained in the Security Agreement or the other Loan Documents to the contrary, the Administrative Agent and the Lenders hereby agree that, upon the acquisition by the Borrower or any Restricted Subsidiary of the Equity Interests in the New Foreign Subsidiary, the security interest in the voting Equity Interests of the New Foreign Subsidiary granted by the Borrower or such Restricted Subsidiary pursuant to the Security Agreement shall be limited to 65% of such Equity Interests and, to the extent the Equity Interests of the New Foreign Subsidiary are represented by certificated securities, the Borrower or the applicable Restricted Subsidiary shall be required to deliver certificated securities evidencing 65% of the voting Equity Interests of the New Subsidiary, rather than certificated securities evidencing 100% of such Equity Interests as contemplated by Section 3.02(b) of the Security Agreement.

 

4.                                      Ratification.  Each of the Borrower and the Guarantors hereby ratifies all of its respective obligations under the Credit Agreement and each of the Loan Documents to which it is a party, and agrees and acknowledges that the Credit Agreement and each of the Loan Documents to which it is a party are and shall continue to be in full force and effect as modified by this Consent.  Except as provided herein, nothing in this Consent extinguishes, novates or releases any right, claim, lien, security interest or entitlement of any of the Lenders or the Administrative Agent created by or contained in any of such documents nor is the Borrower nor any Guarantor released from any covenant, warranty or obligation created by or contained herein or therein.

 

5.                                      Representations and Warranties.  The Borrower and Guarantors hereby represent and warrant to the Administrative Agent and the Lenders that (a) this Consent has been duly executed and delivered on behalf of the Borrower and Guarantors, (b) this Consent constitutes a valid and legally binding agreement enforceable against the Borrower and Guarantors in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law, (c) the representations and warranties contained in the Credit Agreement and the Loan Documents are true and correct on and as of the date hereof in all material respects as though made as of the date hereof (except to the extent any such representations and warranties are

 

2



 

expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct as of such specified earlier date); provided that any representation or warranty that is qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates, (d) after giving effect to this Consent, no Default or Event of Default exists under the Credit Agreement or under any Loan Document as of the Effective Date and (e) the execution, delivery and performance of this Consent has been duly authorized by the Borrower and Guarantors.

 

6.                                      Condition to Effectiveness.  This Consent shall be effective on the Effective Date upon receipt by the Administrative Agent of counterparts of this Consent executed by the Borrower, the Guarantors and the Required Lenders.

 

7.                                      Counterparts.  This Consent may be signed in any number of counterparts, which may be delivered in original, electronic or facsimile form each of which shall be construed as an original, but all of which together shall constitute one and the same instrument.

 

8.                                      Governing Law.  This Consent, all Notes, the other Loan Documents and all other documents executed in connection herewith shall be deemed to be contracts and agreements under the laws of the State of New York and of the United States of America and for all purposes shall be construed in accordance with, and governed by, the laws of New York and of the United States.

 

9.                                      Final Agreement of the Parties.  Any previous agreement among the parties with respect to the subject matter hereof is superseded by the Credit Agreement, as modified by this Consent.  Nothing in this Consent, express or implied is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Consent.

 

10.                               Consent is a Loan Document; References to Credit Agreement.  This Consent is a Loan Document, as defined in the Credit Agreement.  All references in the Credit Agreement to “this Agreement” shall mean the Credit Agreement as modified by this Consent.

 

[Signature Pages Follow]

 

3



 

IN WITNESS WHEREOF, the parties hereto have caused this Consent to be executed by their respective officers thereunto duly authorized as of the Effective Date.

 

 

BORROWER:

 

 

 

MAGNUM HUNTER RESOURCES

 

CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Chief Financial Officer

 

 

 

 

 

 

GUARANTORS:

 

 

 

MAGNUM HUNTER RESOURCES LP,

 

a Delaware limited partnership

 

 

 

By:

Magnum Hunter Resources GP, LLC,

 

 

its general partner

 

 

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

MAGNUM HUNTER RESOURCES GP, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

 

TRIAD HUNTER, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

Signature Page to Limited Consent

 



 

 

MAGNUM HUNTER PRODUCTION INC.,

 

a Kentucky corporation

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

 

 

NGAS HUNTER, LLC

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

 

 

WILLISTON HUNTER ND, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

 

 

BAKKEN HUNTER, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

 

 

MAGNUM HUNTER MARKETING, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

Signature Page to Limited Consent

 



 

 

VIKING INTERNATIONAL RESOURCES CO., INC.,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

 

 

 

 

 

 

SHALE HUNTER, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Joseph C. Daches

 

 

Joseph C. Daches

 

 

Senior Vice President and Treasurer

 

Signature Page to Limited Consent

 



 

 

ADMINISTRATIVE AGENT AND LENDER:

 

 

 

BANK OF MONTREAL

 

 

 

 

 

 

By:

/s/ Gumaro Tijerina

 

 

Gumaro Tijerina

 

 

Managing Director

 

Signature Page to Limited Consent

 



 

 

LENDER:

 

 

 

CAPITAL ONE, NATIONAL ASSOCIATION

 

 

 

 

 

 

By:

/s/ Kristin N. Oswald

 

Name:

Kristin N. Oswald

 

Title:

Vice President

 

Signature Page to Limited Consent

 



 

 

LENDER:

 

 

 

CITIBANK, N.A.

 

 

 

 

 

 

By:

/s/ Phil Ballard

 

Name:

Phil Ballard

 

Title:

Managing Director

 

Signature Page to Limited Consent

 



 

 

LENDER:

 

 

 

DEUTSCHE BANK AG NEW YORK BRANCH

 

 

 

 

 

 

By:

/s/ Kirk L. Tashjian

 

Name:

Kirk L. Tashjian

 

Title:

Vice President

 

 

 

 

 

 

 

By:

/s/ Lisa Wong

 

Name:

Lisa Wong

 

Title:

Vice President

 

Signature Page to Limited Consent

 



 

 

LENDER:

 

 

 

GOLDMAN SACHS BANK USA

 

 

 

 

 

 

By:

/s/ Ashwin Ramakrishna

 

Name:

Ashwin Ramakrishna

 

Title:

Authorized Signatory

 

Signature Page to Limited Consent

 



 

 

LENDER:

 

 

 

SUNTRUST BANK

 

 

 

 

 

 

By:

/s/ Shannon Juhan

 

Name:

Shannon Juhan

 

Title:

Vice President

 

Signature Page to Limited Consent

 



 

 

LENDER

 

 

 

ABN AMRO CAPITAL USA LLC

 

 

 

 

 

 

By:

/s/ David Montgomery

 

Name:

David Montgomery

 

Title:

Executive Director

 

 

 

 

 

 

 

By:

/s/ Darrell Holley

 

Name:

Darrell Holley

 

Title:

Managing Director

 

Signature Page to Limited Consent

 



 

 

LENDER

 

 

 

ROYAL BANK OF CANADA

 

 

 

 

 

 

By:

/s/ Kristan Spivey

 

Name:

Kristan Spivey

 

Title:

Authorized Signatory

 

Signature Page to Limited Consent

 



 

 

LENDER:

 

 

 

CREDIT SUISSE AG, Cayman Islands Branch

 

 

 

 

 

 

By:

/s/ Nupur Kumar

 

Name:

Nupur Kumar

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

By:

/s/ Samuel Miller

 

Name:

Samuel Miller

 

Title:

Authorized Signatory

 

Signature Page to Limited Consent

 



 

 

LENDER

 

 

 

BANK OF AMERICA, N.A.

 

 

 

 

 

 

By:

/s/ Elizabeth Gallagher

 

Name:

Elizabeth Gallagher

 

Title:

Assistant Vice President

 

Signature Page to Limited Consent

 



EXHIBIT 99.1

 

Notice to U.S. Shareholders. The offer described in this document is for the securities of a non-U.S. company. The offer is subject to disclosure requirements of a country that are different from those of the United States. You should be aware that the offeror may purchase securities otherwise than under the offer, such as in open market or privately negotiated purchases.

 

 

10 June 2014

 

Intention to Make a Takeover Offer for Ambassador Oil and Gas Limited by Magnum Hunter Resources Corporation

 

·                                         Magnum Hunter Resources Corporation, a US corporation whose common stock is traded on the New York Stock Exchange (Magnum Hunter), announces its intention to make a conditional off-market takeover offer for Ambassador Oil and Gas Limited (Ambassador).

 

·                                         The Offer consideration will be one (1) share of Magnum Hunter common stock for every 27.8 Ambassador shares.

 

·                                         The Offer implies a value of A$0.34(1) per Ambassador share based on the closing sales price of Magnum Hunter common stock on the NYSE of US$8.84 on Monday 9 June 2014, the last trading day prior to this announcement.

 

·                                         The Magnum Hunter Offer represents a 20% premium to the current implied value of the offer announced by Drillsearch Energy Limited on 28 May 2014 (Drillsearch Offer) and a 74% premium to the closing price of Ambassador shares of $0.195 on Friday 23 May 2014, the trading day prior to Ambassador entering into a trading halt before the announcement of the Drillsearch Offer.

 

Magnum Hunter (NYSE:MHR) today announces its intention to make an off-market takeover offer, via a wholly-owned subsidiary, for all of the ordinary shares in Ambassador (Magnum Hunter Offer).

 

Magnum Hunter is an independent oil and natural gas company engaged in the exploration for and the exploitation, acquisition, development and production of crude oil, natural gas and natural gas liquids resources in the United States. Magnum Hunter is also engaged in midstream and oil field services operations, primarily in West Virginia and Ohio.  Magnum Hunter’s common stock is listed for trading on the New York Stock Exchange and as at the close of trading on 9 June 2014 had a market capitalization of approximately US$1.75 billion.

 

Significant premium to Ambassador’s historical trading prices and Drillsearch Offer

 

The Magnum Hunter Offer represents strong value for Ambassador shareholders, and is priced at a significant premium to the Drillsearch Offer and Ambassador’s historical trading prices.

 


(1)  Calculated based on an exchange rate of 1.069 Australian Dollars per 1.00 US Dollar, as published by Bloomberg at approximately 5:30pm Eastern United States time on 9 June 2014.

(2) VWAPs calculated to 23 May 2014, the trading day prior to Ambassador entering a trading halt before the announcement of the Drillsearch Offer.

 



 

 

Ambassador shareholders will be offered one (1) share of Magnum Hunter common stock for every 27.8 Ambassador shares. The Offer implies a value of A$0.34(1) per Ambassador share based on the closing price of Magnum Hunter common stock of US$8.84 on Monday 9 June 2014, the trading day prior to this announcement.

 

The implied Magnum Hunter Offer price represents a substantial premium of:

 

·                                         74% to the closing price of Ambassador shares of $0.195 on Friday 23 May 2014, the trading day prior to Ambassador entering into a trading halt pending announcement of the Drillsearch Offer;

 

·                                         76% to the 3 month historical volume weighted average price (VWAP) of Ambassador shares of $0.193;

 

·                                         81% to the 6 month VWAP of Ambassador shares of $0.188;

 

·                                         86% to the 9 month VWAP of Ambassador shares of $0.183; and

 

·                                         20% to the implied value of the Drillsearch Offer as of 6 June 2014.

 

Magnum Hunter will seek to engage with the Board of Ambassador to obtain its support for and recommendation of the Magnum Hunter Offer given the compelling value offered to Ambassador shareholders.

 

Magnum Hunter in the US and the Cooper Basin

 

Magnum Hunter is currently active in three unconventional shale resource plays in the United States: (a) the Marcellus Shale in West Virginia and Ohio; (b) the Utica Shale in southeastern Ohio and western West Virginia; and (c) the Williston Basin/Bakken Shale in North Dakota.  Magnum Hunter is also engaged in midstream and oil field services operations, primarily in West Virginia and Ohio, related exclusively to its shale development activities in this region.

 

Magnum Hunter is a major shareholder of New Standard Energy Limited (New Standard), the joint venture partner of Ambassador in PEL 570 in the Cooper Basin in South Australia. Magnum Hunter acquired its equity position in News Standard in connection with a sale by Magnum Hunter of certain of its oil and gas properties in the Eagle Ford Shale in South Texas to a wholly-owned subsidiary of New Standard, in January 2014.

 

In determining to take an equity position in New Standard in connection with the sale transaction, Magnum Hunter was attracted to the development potential of the Cooper Basin, and PEL 570 in particular from a geological perspective. The existing midstream infrastructure within the Cooper Basin and the substantial underutilized existing and under construction LNG facilities in Australia provide a unique investment opportunity for future gas discoveries.  Magnum Hunter and New Standard have formed a strategic and technical alliance with a core focus on growing and developing New Standard’s Australian business, which alliance will be strengthened by Magnum Hunter’s acquisition of Ambassador.

 

Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter commented:

 

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“The Board of Directors and management team of Magnum Hunter recently made a decision to increase our exposure to a very specific region in Australia where we have already established a presence.  Our decision was made based upon a combination of factors, which include the following:  (i) geological interpretation; (ii) substantial land position (shale scale); (iii) existing infrastructure; (iv) gas price and immediate exposure to international takeaway markets; (v) and most importantly, significant upside potential for our shareholders.  We are not budgeting any cash expenditures on behalf of Magnum Hunter surrounding this investment in Australia for calendar year 2014.  We believe that the knowledge we have gained over the past five years in successfully exploring the Eagle Ford, Bakken, Marcellus and Utica Shale Plays is transferrable to the Cooper Basin of Australia.  As we have learned from our exposure to shale plays in the United States, early movers have the greatest opportunity for eventual success.”

 

By accepting Magnum Hunter shares in exchange for Ambassador shares, Ambassador shareholders retain exposure to the upside potential of Ambassador’s assets and also gain exposure to:

 

·                                         A US public oil and natural gas company focused on growing reserves, production volumes and cash flow, primarily in the Marcellus Shale and Utica Shale plays in the Appalachian Basin in West Virginia and Ohio and the Bakken Shale play in the Williston Basin in North Dakota.

 

·                                         Magnum Hunter’s senior management team, which has extensive energy sector experience and significant expertise in the principal operational disciplines in Magnum Hunter’s core unconventional resource plays.

 

·                                         Three of the top-tier shale plays in the US — the Marcellus, Utica and Bakken Shales — in which Magnum Hunter holds total net acreage of approximately 300,000 acres.

 

·                                         Onshore US production, with an expected 2014 exit production rate of 32,500 boe/d.

 

·                                         Magnum Hunter’s majority-owned midstream operations in West Virginia and Ohio, consisting primarily of a gas gathering system supporting the development of existing and anticipated future Marcellus Shale and Utica Shale acreage positions.

 

Impact of Transaction on Magnum Hunter’s Common Stock

 

Ambassador currently has approximately 142.1 million shares outstanding. At the offer ratio, Magnum Hunter plans to issue approximately 5.1 million shares of common stock in order to acquire 100% of Ambassador, equivalent to approximately 2.6% of Magnum Hunter’s outstanding shares of common stock as of 9 June 2014. Ambassador shareholders will own approximately 2.5% of the outstanding shares of common stock of Magnum Hunter as of 9 June 2014 (and pro forma for the issuance of shares pursuant to the Magnum Hunter Offer) if Magnum Hunter acquires 100% of Ambassador.

 

Bid Conditions

 

The Magnum Hunter Offer will be subject to certain terms and conditions which are summarised in Schedule 1. The full conditions to the Magnum Hunter Offer will be set out in the Bidder’s Statement which Magnum Hunter expects to dispatch to Ambassador shareholders as soon as possible. Ambassador will be required to issue a Target’s Statement to Ambassador shareholders following dispatch of Magnum Hunter’s Bidder’s Statement.

 

Indicative timetable

 

The Bidder’s Statement is expected to be lodged with ASIC, Ambassador and released to the ASX as soon as practicable and dispatched to Ambassador shareholders as soon as possible thereafter.

 

A Target’s Statement will also need to be dispatched by Ambassador to Ambassador shareholders in accordance with the required timetable set out in the Corporations Act 2001.

 

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Advisors

 

Magnum Hunter’s legal advisers are Norton Rose Fulbright (Australia) and Bracewell & Giuliani LLP (US).

 

Ends—

 

For further information please contact:

Magnum Hunter Resources Corporation

ir@magnumhunterresources.com

 

Chris Benton

Vice President, Finance and Capital Markets

+1 (0) 832-203-4539

 

Cham King

Assistant Vice President, Investor Relations

+1 (0) 832-203-4560

 

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About Magnum Hunter

 

Magnum Hunter is an independent oil and natural gas company engaged in the exploration for and the exploitation, acquisition, development and production of crude oil, natural gas and natural gas liquids resources in the United States. Magnum Hunter is currently active in three unconventional shale resource plays in the United States: (a) the Marcellus Shale in West Virginia and Ohio; (b) the Utica Shale in southeastern Ohio and western West Virginia; and (c) the Williston Basin/Bakken Shale in North Dakota. Magnum Hunter is also engaged in midstream and oil field services operations, primarily in West Virginia and Ohio. Magnum Hunter’s common stock is listed for trading on the New York Stock Exchange and as at the close of trading on 9 June 2014 had a market capitalization of approximately US$1.75 billion.  Magnum Hunter is a major shareholder of New Standard, the joint venture partner of Ambassador in PEL 570.

 

About Ambassador:

 

Ambassador Oil & Gas Limited is a diversified unconventional oil and gas exploration company with assets in Australia and the US.

 

PEL 570, in the Cooper Basin in South Australia, has independently identified potential gas in place of up to 20 trillion cubic feet contained in unconventional rock and coal seams. The permit is situated in the northern end of the gas prone Patchawarra trough which is characterised by low-C02 levels and higher liquids content, particularly in the northern regions of the basin. It covers 2400 km(2), is close to infrastructure and remains a key target for unconventional gas exploitation. The Cooper Basin is linked to the east coast gas market by an existing gas pipeline network providing Cooper Basin gas with direct access to Queensland Liquefied Natural Gas projects near Gladstone currently under construction and the wider Australian East coast market.

 

In the US, Ambassador has acquired highly prospective oil and gas exploration leases in emerging, oil prone, resource plays in Colorado. Ambassador holds a parcel of leases in Colorado totalling 3,327 net acres and has recently exercised an option to acquire a further net 9,350 acres in Colorado.

 

The foregoing information regarding Ambassador is derived from information in Ambassador’s public reports.

 

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Schedule 1  —  Offer Terms and Conditions

 

1                                        Definitions:

 

(1)                                 Ambassador means Ambassador Oil and Gas Limited (ASX:AQO).

 

(2)                                 Ambassador Board means the board of directors of Ambassador.

 

(3)                                 Ambassador Group means Ambassador and each of its subsidiaries (as defined under the Corporations Act).

 

(4)                                 Ambassador Shares means a fully paid ordinary share in Ambassador.

 

(5)                                 Announcement Date means 10 June 2014, being the date of announcement of the Magnum Hunter Offer.

 

(6)                                 ASX means ASX Limited or the securities exchange operated by it (as applicable).

 

(7)                                 Corporations Act means the Corporations Act 2001 (Cth).

 

(8)                                 Encumbrance means:

 

(a)                                a security interest;

 

(b)                                an easement, restrictive covenant, caveat or similar restriction over property;

 

(c)                                 any other interest or arrangement of any kind that in substance secures the payment of money or the performance of an obligation, or that gives a creditor priority over unsecured creditors in relation to any property (including a right to set off or withhold payment of a deposit or other money);

 

(d)                                a right of any person to purchase, occupy or use an asset (including under an option, agreement to purchase, licence, lease or hire purchase);

 

(e)                                 any other thing that prevents, restricts or delays the exercise of a right over property, the use of property or the registration of an interest in or dealing with property; or

 

(f)                                  an agreement to create anything referred to above or to allow any of them to exist.

 

(9)                                Farm-out Agreement means the farm-out agreement between Ambassador and New Standard in relation to PEL 570, announced on the ASX by Ambassador on 10 December 2013.

 

(10)                         Magnum Hunter means Magnum Hunter Resources Corporation (NYSE:MHR).

 

(11)                          Magnum Hunter Group means Magnum Hunter and each of its subsidiaries (as defined under the Corporations Act).

 

(12)                          New Standard means New Standard Energy Limited. (ASX:NSE).

 

(13)                          Offers means the Magnum Hunter Offer and each of the other offers made by a wholly-owned subsidiary of Magnum Hunter in the same terms for Ambassador Shares and includes a reference to those offers as varied in accordance with the Corporations Act.

 

(14)                          Offer Period means the period commencing on [·] and ending at [·] pm (Sydney time) on [·].

 

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(15)                          Public Authority means any government or any governmental, semi-governmental, administrative, statutory or judicial entity, authority or agency, whether in Australia or elsewhere, including the ACCC (but excluding the Takeovers Panel, ASIC and any court that hears or determines proceedings under section 657G or proceedings commenced by a person specified in section 659B(1) of the Corporations Act in relation to the Takeover Bid). It also includes any self-regulatory organisation established under statute or any stock exchange.

 

(16)                          Takeover Bid means the takeover bid constituted by the Offers.

 

2                                        Conditions:

 

(a)                                Minimum acceptance condition

 

Before the end of the Offer Period, Magnum Hunter (or its wholly owned subsidiary) has a relevant interest in more than 50.1% (by number) of the Ambassador Shares on issue at that time.

 

(b)                                No prescribed occurrences

 

None of the following events happens during the period beginning on the Announcement Date and ending at the end of the Offer Period:

 

(i)                                    Ambassador converts all or any of its shares into a larger or smaller number of shares;

 

(ii)                                 Ambassador or a subsidiary of Ambassador resolves to reduce its share capital in any way;

 

(iii)                              Ambassador or a subsidiary of Ambassador:

 

(A)                              enters into a buy-back agreement; or

 

(B)                              resolves to approve the terms of a buy-back agreement under section 257C(1) or 257D(1) of the Corporations Act;

 

(iv)                             Ambassador or a subsidiary of Ambassador issues shares or grants an option over its shares, or agrees to make such an issue or grant such an option;

 

(v)                                Ambassador or a subsidiary of Ambassador issues, or agrees to issue, convertible notes;

 

(vi)                             Ambassador or a subsidiary of Ambassador disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property;

 

(vii)                          Ambassador or a subsidiary of Ambassador grants, or agrees to grant, a security interest in the whole, or a substantial part, of its business or property;

 

(viii)                       Ambassador or a subsidiary of Ambassador resolves to be wound up;

 

(ix)                             a liquidator or provisional liquidator of Ambassador or of a subsidiary of Ambassador is appointed;

 

(x)                                a court makes an order for the winding up of Ambassador or of a subsidiary of Ambassador;

 

(xi)                             an administrator of Ambassador, or of a subsidiary of Ambassador, is appointed under section 436A, 436B or 436C of the Corporations Act;

 

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(xii)                          Ambassador or a subsidiary of Ambassador executes a deed of company arrangement; or

 

(xiii)                       a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of Ambassador or of a subsidiary of Ambassador.

 

(c)                                 No material adverse change to Ambassador

 

During the period beginning on the Announcement Date and ending at the end of the Offer Period, no event or series of related events occurs which has or is likely to have a material adverse effect on the assets and liabilities, financial position and performance, profitability or prospects of the Ambassador Group taken as a whole, including:

 

(i)                                    any event or series of related events which has or is likely to have the effect of diminishing the consolidated net assets of the Ambassador Group as set out in the consolidated balance sheet of Ambassador at 31 December 2013 by at least $500,000; or

 

(ii)                                 termination or frustration of the Farm-out Agreement,

 

but does not include:

 

(iii)                              any matter, event, circumstance or change directly resulting from any actions taken (or omitted to be taken) following and in accordance with a written request from Magnum Hunter or with Magnum Hunter’s written consent; or

 

(iv)                             any matter, event or circumstance arising from changes in economic or business conditions which impact on Ambassador and its competitors in a similar manner.

 

(d)                                No regulatory action

 

During the period beginning on the Announcement Date and ending at the end of the Offer Period:

 

(i)                                    there is not in effect any preliminary or final decision, order or decree issued by a Public Authority;

 

(ii)                                 no action or investigation is instituted, or threatened, by any Public Authority with respect to Ambassador or any subsidiary of Ambassador; and

 

(iii)                              no application is made to any Public Authority (other than an application by any company within the Magnum Hunter Group, an application under section 657G of the Corporations Act or an application commenced by a person specified in section 659B(1) of the Corporations Act in relation to the Takeover Bid), in consequence of, or in conjunction with, the Takeover Bid, which restrains, prohibits or impedes or threatens to restrain, prohibit or impede, or may otherwise materially adversely impact upon, the making of the Takeover Bid or the completion of any transaction contemplated by this Announcement or the Bidder’s Statement or seeks to require the divestiture by Magnum Hunter of any Ambassador Shares, or the divestiture of any assets by a company within the Ambassador Group.

 

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(e)                                 Conduct of business

 

None of the following events happens (each, a Prohibited Transaction) during the period beginning on the Announcement Date and ending at the end of the Offer Period:

 

(i)                                    a company within the Ambassador Group:

 

(A)                              acquires or disposes of;

 

(B)                              agrees to acquire or dispose of; or

 

(C)                              offers, proposes, announces a bid or tenders for, any business, asset, interest in a joint venture, entity or undertaking, the value of which exceeds $500,000;

 

(ii)                                 a company within the Ambassador Group creates any Encumbrance over the whole or a substantial part of its business or property (other than a lien which arises by operation of law or legislation securing an obligation not yet due and consistent with past practice);

 

(iii)                              any person is appointed to the Ambassador Board, other than those nominated by Magnum Hunter;

 

(iv)                             a company within the Ambassador Group:

 

(A)                              increases the remuneration of, or otherwise varies the employment arrangements with, any of its directors or employees; or

 

(B)                              accelerates the rights of any of its directors or employees to compensation or benefits of any kind,

 

other than as a result of contracted arrangements that are consistent with past practice and in effect as at 1 May 2014;

 

(v)                                a company within the Ambassador Group pays any of its directors or employees a termination or retention payment;

 

(vi)                             a company within the Ambassador Group:

 

(A)                              enters into any contract or commitment involving revenue or expenditure by the Ambassador Group of more than $500,000 over the term of the contract or commitment;

 

(B)                              terminates or amends in a material manner any contract material to the conduct of the Ambassador Group’s business or which involves revenue or expenditure of more than $500,000 over the term of the contract;

 

(C)                              waives any material third party default; or

 

(D)                              accepts as a settlement or compromise of a material matter (relating to an amount in excess of $500,000) less than the full compensation due to the Ambassador Group;

 

(vii)                          a company within the Ambassador Group undertakes or agrees to undertake capital expenditure in excess of $500,000 in aggregate;

 

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(viii)                       a company within the Ambassador Group enters into or resolves to enter into a transaction with any related party of Ambassador as defined in section 228 of the Corporations Act; or

 

(ix)                             a company within the Ambassador Group borrows or agrees to borrow any money, but a Prohibited Transaction does not include any matter, the undertaking of which Magnum Hunter has approved in writing.

 

(f)                                  No other party has acquired control

 

During the period beginning on the Announcement Date and ending at the end of the Offer Period, no party other than a member of the Magnum Hunter Group has acquired a relevant interest in more than 45% (by number) of the issued shares of Ambassador.

 

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