Irving, Texas-based Magnum Hunter Resources has added three financial institutions to its senior bank facility and increased the borrowing base by $35 million to $160 million. Michael McInerney, v.p., of corporate development, said the increase in the borrowing base was made possible by two factors: A $31.3 million acquisition of oil and gas properties in New Mexico that act as collateral; and the addition of the three new institutions, Credit Agricole Indousez, ABB Energy Capital and Hibernia National Bank. It is better to expand the base rather than upsize the $225 million three-year revolver, said McInerney, as the facility is still essentially the same, he noted. Magnum Hunter is an independent exploration and production company of gas and crude oil.
Magnum could have gone outside the syndicate to finance the acquisition, but Magnum has a good bank group, McInerney noted. When prices were low in 1998, the banks raised the amount Magnum could borrow, he added. Asked how the institutions were selected, he said, "Magnum is always in contact with banks about joining the facility. Banks want to lend at the moment because of the low rates and also to increase or have some exposure to the sector." Though there are mixed signals on the industry, Magnum does not look at prices now, but prices over the terms of the acquired property, he said. The reserve life of the acquired properties is 13.4 years, he noted. "You want to buy when prices are low, and sell high," he stated.
Deutsche Bank leads the credit and CIBC World Markets is syndication agent. Deutsche Bank was chosen after a bid in which the longer historical relationship was the deciding factor rather than competitive pricing (LMW, 6/27). The credit replaces two other lines that were rolled into one. McInerney declined to comment on pricing.