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Natural gas inventory estimates
Industry surveys projected that natural gas inventories could increase by 95 Bcf for the week ended July 10, 2015. The better-than-expected natural gas inventory increase led to a decline in natural gas prices. The inventory increase implies that supply is increasing or that demand is slowing.
Natural gas inventories increased for 15 consecutive weeks. The current natural gas inventories are 31% higher than the 2,114 Bcf recorded in 2014. They’re also 2.90% more than the five-year average of 2,694 Bcf. Natural gas inventories rose by 105 Bcf over the same week last year. Meanwhile, the five-year average gain over this period is 71 Bcf.
Declining natural gas prices should negatively affect the margins of crude oil and natural gas producers like Cimarex Energy (XEC), Contango (MCF), and Sandridge (SD). These companies account for 4.06% of the SPDR Oil and Gas ETF (XOP). The natural gas production mix of these stocks is more than 46% of their production portfolio.
This too shall pass .
Crude Oil 50.81 -0.10 -0.20%
Natural Gas 2.866 +0.012 +0.42%
Agreed but up to a certain point .
The current momentum could push natural gas prices higher. The consensus of increasing demand due to warm weather could boost natural gas prices. The next resistance for natural gas prices is at $3 per MMBtu. Prices hit this mark in May 2015. On the other hand, oversupply and rising gas stocks could push natural gas prices lower. The key support for gas prices is at $2.50 per MMBtu. Prices last hit this level in April 2015.
The up-trending channel suggests that August natural gas futures could oscillate between $2.50 MMBtu and $3 MMBtu. Industry estimates suggest natural gas prices could average around $3.25 per MMBtu in the second half of 2015. Natural gas prices are trading above their 20- and 50-day moving averages.
The performance of ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) benefit by increasing natural gas prices. They also affect energy producers like Memorial Resources (MRD), Magnum Hunter Resources (MHR), and Contango (MCF). Combined, they account for 2.83% of the Spider Oil and Gas ETF (XOP). These stocks’ natural gas production mix is more than 59% of their total production.
August natural gas futures contracts trading on the NYMEX resumed their rally on Thursday, July 15, 2015. Prices settled above the key resistance level of $2.90 per MMBtu (British thermal units in millions) yesterday. Prices have been oscillating in a narrow range of $2.70 to $2.90 per MMBtu for the last month. Weather and inventory estimates are driving natural gas prices
Bank of Montreal is the administrative agent and lead lender under the First Lien Credit Agreement.
The foregoing description of the Fifth Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of the Fifth Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K.
Magnum Hunter previously disclosed its entry into the First Lien Credit Agreement and the amendments to the First Lien Credit Agreement that preceded the Fifth Amendment, which amendments consist of the First Amendment to Credit Agreement and Limited Waiver dated February 24, 2015, the Second Amendment to Credit Agreement and Limited Waiver dated April 17, 2015, the Third Amendment to Credit Agreement and Limited Consent dated May 28, 2015 and the Fourth Amendment to Credit Agreement and Limited Consent dated June 19, 2015, and filed copies thereof with the Securities and Exchange Commission (the "SEC"), in the Company's Current Report on Form 8-K filed with the SEC on October 28, 2014, the Company's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 2, 2015 and the Company's Current Reports on Form 8-K filed with the SEC on April 20, 2015, May 29, 2015 and June 24, 2015, respectively.
Magnum Hunter previously disclosed that it had determined to pursue the sale by the Company of 100% of its current equity ownership interest in Eureka Hunter Holdings, LLC in a Current Report on
Form 8-K filed with the SEC on June 25, 2015. In connection with this contemplated sale, the Company has appointed BMO Capital Markets Corp. as the Company's M&A and financial advisor to assist in the negotiations with potential purchasers.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
Form 8-K for MAGNUM HUNTER RESOURCES CORP
Entry into a Material Definitive Agreement, Creation of a Direct Fin
Item 1.01 Entry into a Material Definitive Agreement.
Amendment to First Lien Credit Agreement
On and effective as of July 10, 2015, Magnum Hunter Resources Corporation ("Magnum Hunter" or the "Company") entered into a Fifth Amendment to Credit Agreement and Limited Waiver (the "Fifth Amendment") by and among Magnum Hunter, as borrower, Bank of Montreal, as administrative agent, and the several lenders and guarantors party thereto. The Fifth Amendment amended Magnum Hunter's Fourth Amended and Restated Credit Agreement, dated as of October 22, 2014 (as amended, the "First Lien Credit Agreement") to, among other things,
(i) permanently eliminate the Company's obligation under the First Lien Credit Agreement to raise $65 million in net cash proceeds from certain specified transactions; and (ii) extend the amount of time Magnum Hunter and its Restricted Subsidiaries (as defined in the First Lien Credit Agreement) may have accounts payable outstanding after the date of invoice from 90 days to 180 days for any day on or prior to the earlier of (a) December 31, 2015 or (b) the date that is ten business days following the date on which the Company consummates the sale of all or substantially all of the Company's equity ownership interest in Eureka Hunter Holdings, LLC (the date of such sale, the "Trigger Date"), after which earlier date the restriction will revert back to 90 days.
In addition, the Fifth Amendment includes a waiver of compliance by the Company with the current ratio and total secured net debt to EBITDAX (as defined in the First Lien Credit Agreement) ratio covenants under the First Lien Credit Agreement for the fiscal quarter ended June 30, 2015 and for each fiscal quarter ending thereafter until the earlier of (i) the fiscal quarter ending December 31, 2015 or (ii) the fiscal quarter in which the Trigger Date occurs,