EXCLUSIVE: Activist investor gathering support for takeover attempt at Utica shale driller Magnum Hunter
Oct 1, 2015, 1:10pm EDT Updated Oct 1, 2015, 2:24pm EDT
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A Texas energy consultant wants to lead a takeover of oil and gas company Corp.
, CEO of Austin-based Atlas Consulting, said he has gathered enough support from shareholders for a takeover attempt, though he hopes the Texas company's management will work with him on suggested changes. The shale drilling company with a sizable acreage base in eastern Ohio’s Utica shale has attractive assets, he said, but is over-leveraged.
A map of Magnum Hunter's Eureka Hunter pipeline.
A map of Magnum Hunter's Eureka Hunter pipeline.
“We have a credible investor willing to step in and buy a large chunk of the company,” Salazar told me. “We have a large amount of the outstanding shares, including major fund owners, who would vote yes with us or speak positively with us in a board position.”
The Appalachian-focused company, based near Dallas, shed assets over the summer to raise capital but still was almost $10 million short of meeting a $65 million requirement before the company and the Bank of Montreal (NYSE:BMO) . It has to make a $30 million interest payment next month.
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"I am confident that I can aggregate the needed influence in Magnum Hunter to facilitate change prior to the company’s next major obligation payment in mid-November," Salazar said in a letter sent to the company Wednesday.
Magnum Hunter (NYSE:MHR) did not respond to messages seeking comment this week.
The driller is not resting. Two weeks ago it hired a former Wells Fargo and Lehman Brothers investment banker named . CEO said the vice president of finance and capital markets would help the company with "financial engineering" opportunities and assist various restructuring opportunities.
Salazar said he wants action.
"I can't watch what you say anymore," he said of his message to the company. "I watch what you do."
Salazar, a small investor in Magnum Hunter, was critical of the company’s operations and especially its handling of the potential selloff of its Eureka Pipeline system. The company said in June it would for the valuable pipeline for as much as $600 million.
Form 8-K for GRAPHITE CORP
Entry into a Material Definitive Agreement, Financial Statements and Exhibits
Item 1.01 Entry into a Material Definitive Agreement
On September 16, 2015, Graphite Corp. (the "Company") entered into an equity purchase agreement (the "Purchase Agreement") with Premier Venture Partners, LLC ("Premier"). Under the terms of the Purchase Agreement, Premier has agreed to invest up to $2,000,000 to purchase shares of the Company's common stock ("Shares"). The Company also entered into a registration rights agreement (the "Registration Agreement") with Premier, which governs the filing of a registration statement intended to cover the Shares acquired under the Purchase Agreement.
The Purchase Agreement allows, but does not require, the Company to issue and sell up to the number of Shares having an aggregate purchase price of $2,000,000 to Premier. Subject to the terms and conditions of the Purchase Agreement and the Registration Agreement, the Company may, in its sole discretion, deliver notice to Premier which states the dollar amount which it intends to sell to Premier on a certain date. The amount that the Company shall be entitled to sell to Premier shall not exceed 200% of the average daily trading volume of the Company's common stock for the five trading days prior to the applicable notice date. Provided that all other applicable conditions are met, the minimum dollar amount, which Premier has an obligation to purchase from the Company in any transaction is $4,000. The minimum price at which Premier has an obligation to purchase Shares is $0.001. The amount of Shares to be held at any given time by Premier cannot exceed 4.99% of the Company's outstanding Shares. The purchase price for the Shares issued to Premier will be the amount multiplied by 75% of the lowest individual daily VWAP (i.e., the volume weighted average price (the aggregate sales price of all trades of Shares during a trading day divided by the total number of Shares traded during such trading day) of the Shares during a trading day) of the common stock during the pricing period. The Shares sold by the Company to Premier must be registered stock pursuant to the Registration Agreement.
As a condition for entering into the Purchase Agreement, the Company has agreed to issue 3,424,657 Shares (the "Initial Commitment Shares") to Premier. The Initial Commitment Shares will not be included in the Registration Statement.
On the date that Premier has purchased in the aggregate $500,000 in Shares from the Company, the Company has agreed to issue another $25,000 in restricted Shares priced at the average VWAP of the Shares for the three trading days prior to the date. The Additional Commitment Shares shall not constitute registrable securities and shall not be included in the Registration Statement.
CVR Partners, LP to Combine with Rentech Nitrogen Partners, L.P. To Create a North American Nitrogen Fertilizer Leader
- Creates a leading nitrogen fertilizer producer with more diversified assets, feedstocks, and markets.
- At least $12 million of annual run-rate operating synergies expected.
- Rentech Nitrogen unitholders to receive, for each unit, 1.04 units of CVR Partners (worth $11.12 at the closing price of August 7), plus $2.57 of cash, and retain the value of the Pasadena facility.
- Equity consideration enables all unitholders to participate in benefits of combination.
- The transaction is the culmination of a strategic review process publicly announced by Rentech Nitrogen on February 17, 2015.
SUGAR LAND, Texas and LOS ANGELES, Aug. 10, 2015 /PRNewswire/ -- CVR Partners, LP (NYSE: UAN) and Rentech Nitrogen Partners, L.P. (NYSE: RNF) announced today the execution of a definitive merger agreement under which CVR Partners will acquire all outstanding units of Rentech Nitrogen. The combination excludes Rentech Nitrogen's Pasadena facility, which will be retained by current holders of Rentech Nitrogen, or sold separately for their benefit. Total consideration for Rentech Nitrogen excluding the Pasadena facility is $533 million, implying a total enterprise value of approximately $839 million, based on closing prices on August 7, 2015. The transaction is the culmination of a strategic review process publicly announced by Rentech Nitrogen on February 17, 2015.
CVR Partners, LP Logo.
CVR Partners and Rentech Nitrogen will host a conference call today at 10 a.m. EDT to review additional details regarding today's announcement, as summarized in an investor presentation that will be posted on each partnership's website prior to the call.
Under the terms of the transaction, each outstanding common unit of Rentech Nitrogen will be exchanged for 1.04 units of CVR Partners and $2.57 of cash. The value of the CVR Partners units plus the cash consideration, which excludes the value of the Pasadena facility, represents a 20.3% premium to the unit value implied from the unaffected exchange ratio on February 16, 2015, one day before Rentech Nitrogen announced its process to explore strategic alternatives; a 32.9% premium at the current exchange ratio; or a 14.1% premium to the unit value implied from the last 30-day volume weighted average price exchange ratio through August 7, 2015. Any value realized from the sale of the Pasadena facility would add to such premium.
Upon closing of the transaction, Rentech Nitrogen's unitholders (including Rentech, Inc.) will own approximately 40.5 million units, or 35.6%, of the combined partnership. As part of the transaction, CVR Partners will assume or refinance Rentech Nitrogen's net debt, which was approximately $307 million as of March 31, 2015.
"The merger of CVR Partners and Rentech Nitrogen Partners creates a new leader in the growing nitrogen fertilizer industry. Once the merger is complete, we will be the second largest producer of urea ammonium nitrate (UAN) in North America," said Jack Lipinski, executive chairman of CVR Partners. "In addition to enhancing our current attractive market position, we expect the merger will be double-digit accretive to distributable cash per unit before synergies. The combination of our two strategically located fertilizer assets in Kansas and Illinois, a strong combined balance sheet and highly experienced management teams positions the merged companies to generate long-term value for unitholders."
"The addition of Rentech Nitrogen's East Dubuque fertilizer facility increases our scale and diversifies our geography and raw material feedstock," said Mark Pytosh, chief executive officer of CVR Partners. "Our customers will benefit from the expanded availability and variety of nitrogen fertilizer products manufactured at the two facilities. The merger also expands our footprint into the upper Corn Belt region, which has the largest concentration of users in the U.S. for the direct application of nitrogen fertilizer products.
"The merger of CVR Partners and Rentech Nitrogen Partners brings significant value to our respective unitholders, customers and employees," Pytosh said. "We welcome the talented and experienced Rentech Nitrogen employees to CVR Partners."
"We believe this combination with CVR Partners is a compelling opportunity to create value for Rentech Nitrogen's unitholders. The transaction is structured to provide our unitholders with significant value, as well as the chance to participate in future value creation in a combined partnership that is well-positioned for success," said Keith Forman, chief executive officer of Rentech Nitrogen. "We believe that the resulting company will benefit from larger scale; diversification of plants, feedstocks, and markets; and reduced costs. We intend to immediately return to a focused process to sell the Pasadena facility, before the closing of the merger with CVR Partners."
The combination of two pure-play, complementary nitrogen fertilizer producers creates an entity of significantly increased scale and production capacity, improved overall operating reach and greater cash flow generation. The combined entity will also benefit from the world's most attractive grain market in the Mid Corn Belt, in addition to competitive and diversified feedstocks. Furthermore, both have identical distribution policies, where they pay out to unitholders all cash available for distribution each quarter, and their opposite year plant turnarounds reduce earnings volatility.
The merger provides unitholders with ownership in a much larger and more diverse entity with a combined enterprise value of over $1.6 billion based on closing prices on August 7. The combined entity will have a stronger balance sheet with increased liquidity in the capital markets and will be capable of pursuing significantly larger and more meaningful growth opportunities as the industry consolidates.
The merger is structured to provide the unitholders of Rentech Nitrogen with an opportunity to benefit from potential future unit price appreciation and increased cash distributions through ownership of CVR Partners' common units.
CVR Partners expects this transaction to be double-digit accretive to distributable cash per unit before synergies. The partnership expects to realize meaningful synergies of at least $12 million, from SG&A cost savings, logistics and procurement improvements, and more strategic and efficient marketing of the combined products.
Each partnership has in place plans to increase the output of products and improve efficiency. CVR Partners' output of ammonia is expected to increase by approximately 75 tons per day in the second half of 2016, as a result of additional hydrogen supply which will be available from the hydrogen plant currently under construction at the adjacent Coffeyville refinery of CVR Refining, LP. Rentech Nitrogen expects to increase its ammonia production by 50 tons per day, and reduce energy input for each ton of ammonia produced by 1.3 MMBTU beginning in the second half of 2016, following the completion of the new ammonia converter project that is currently underway.
Rentech Nitrogen will distribute to its unitholders, pro rata, net proceeds of any future sale of the Pasadena facility. There can be no assurances that the Pasadena facility can be sold prior to the closing date of the merger or at all.
The cash portion of the consideration is expected to be taxable to Rentech Nitrogen unitholders while the distribution of units in CVR Partners is expected to be tax-free.
DJ Penn Virginia Cuts Payout to Preserve Liquidity -- Market Talk
Sep 17, 2015 12:48:00 (ET)
12:48 EDT - Penn Virginia (PVA) has joined the ranks of energy companies halting shareholder payouts in light of oil's slump. PVA says that it won't pay out third-quarter dividends on its Series A and Series B depositary shares, which carry 1/100 interest in its preferred shares. PVA cites the need "to preserve liquidity and the resulting reduction in capital available to invest in its high-quality assets." Earlier this month, Canadian companies Penn West Petroleum. and Pengrowth Energy cut their payouts to shareholders. Linn Energy LLC, the largest oil-and-gas producing partnership, has also said it would stop making dividend-like payments
Penn Virginia (PVA - Get Report), an independent oil and gas company, explores, develops, and produces crude oil, natural gas liquids, and natural gas in various onshore regions of the U.S. This stock is trading up 17.4% to 93 cents per share in Thursday's trading session.
From a technical perspective, Penn Virginia is ripping sharply higher here and breaking out above some near-term overhead resistance levels at 88 cents to its 20-day moving average of 93 cents per share with lighter-than-average volume. This large move to the upside on Thursday is now starting to push shares of Penn Virginia within range of triggering a much bigger breakout trade above some key near-term overhead resistance levels. That trade will trigger if this stock manages to take out some near-term overhead resistance levels at $1 to $1.09 with high volume.