Exhibit 10.1

 

Execution Version

 

SECOND AMENDMENT
TO
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
EUREKA HUNTER HOLDINGS, LLC

 

March 7, 2013

 

This Second Amendment (this “Amendment”) to the Amended and Restated Limited
Liability Company Agreement of Eureka Hunter Holdings, LLC (the “Company”),
dated as of March 21, 2012 (as amended by that certain First Amendment thereto
dated as of April 2, 2012, the “LLC Agreement”), is hereby adopted, executed and
agreed to by the Company, Magnum Hunter Resources Corporation, a Delaware
corporation (“MHR”), and Ridgeline Midstream Holdings, LLC, a Delaware limited
liability company (the “ArcLight Member” and, together with MHR, the “Members”).
Capitalized terms used but not defined herein have the respective meanings set
forth in the LLC Agreement.

 

WHEREAS, pursuant to and in accordance with Section 14.1 of the LLC Agreement,
the Members are entering into this Amendment in order to amend certain
provisions of the LLC Agreement as more fully set forth herein; and

 

WHEREAS, acting pursuant to the power and authority granted to them under
Section 14.1 of the LLC Agreement, the Members have determined that this
Amendment is advisable and in the best interest of the Company.

 

NOW, THEREFORE, the Members do hereby amend the LLC Agreement as follows:

 

Section 1.                                           Amendment.

 

(a)                                 Section 1.1 of the LLC Agreement is hereby
amended to amend and restate each of the following definitions in their entirety
as follows:

 

“TransTex” means TransTex Gas Services LP, a Delaware limited partnership, and
its successor, TT Transition LP, a Delaware limited partnership.”

 

“TransTex Member” means any of TransTex, Five Talents Oil & Gas LLC, AJAE
Limited Partnership, Gary C. Evans or any TransTex Permitted Transferee, and
“TransTex Members” means all of such Persons, collectively.

 

(b)                                 Section 4.2(b)(xiii) of the LLC Agreement is
hereby amended by inserting the following sentence at the end thereof:

 

“For the avoidance of doubt, any transaction, contract or arrangement between
the Company or any of its direct or indirect subsidiaries, on the one hand, and
any of the Members or their respective Affiliates (other than the Company and
its direct or indirect subsidiaries), on the other hand, involving an amount
equal to or greater than $750,000 (including with respect to potential economic
value or cash flow), whether in a single transaction or in a series of
transactions (whether related or unrelated) occurring within

 

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any twelve-month period, shall be deemed to be “material” for purposes of this
Section 4.2(b)(xiii).  Once any transaction or series of transactions (whether
related or unrelated) is approved by the Requisite Preferred Holders pursuant to
this Section 4.2(b)(xiii), such transaction or series of transactions shall be
disregarded for purposes of calculating the $750,000 threshold in the preceding
sentence.”

 

(c)                                  Section 4.2(d) of the LLC Agreement is
hereby amended and restated in its entirety as follows:

 

“(d)                           Notwithstanding anything in this Section 4.2 to
the contrary, but subject to Article 7 hereof (except as expressly provided
below), (x) effective as of March 7, 2013 and until the Commitment Date, the
capital requirements of the Company shall be funded as set forth in Section 8.7
of this Agreement; provided, however, that the Company may (1) utilize Funded
Debt incurred in accordance with the terms (including, as applicable, with
Section 4.2(b)) of this Agreement to fund its obligations under an annual budget
of the Company approved by the Board with the consent of the ArcLight Directors
or (2) issue Equity Securities having rights, including rights to distribution
and rights upon liquidation, junior to the Preferred Units to fund any of its
obligations (other than those included in the Company’s 2013 annual budget as
approved pursuant to the last sentence of this clause (d)) as approved by the
Board; provided, however, that any such issuance shall not be subject to the
provisions of Article 7 hereof if the proposed use of proceeds from such
issuance is solely to fund capital expenditures, acquisitions and other
obligations that are included in an annual budget (or an amendment thereto) that
was approved without the consent of the ArcLight Directors; (y) if at any time a
Material Default has occurred, neither the Company nor any Company Subsidiary
shall take any action set forth in Section 4.2(a) (and the Company shall not,
and shall not permit any Company Subsidiary, whether by merger, consolidation,
operation of law or otherwise, to take any such action) without the prior vote
or written consent of the Requisite Preferred Holders; and (z) other than as set
forth in clauses (x) and (y) above, no consent from the Requisite Preferred
Holders will be required under Section 4.2(b) for any action of the Company or
any Company Subsidiary that is included in the initial budget of the Company
approved by the Board on the Effective Date or any subsequent annual budget (or
amendment or modification thereto) approved by the Board with the consent of the
ArcLight Directors; provided, however, that the ArcLight Member shall have no
obligation, under the Unit Purchase Agreement or otherwise, to purchase
additional Preferred Units or otherwise fund any of the Company’s obligations
under any material amendment or modification of a budget of the Company that is
approved by the Board without the consent of the ArcLight Directors. For the
avoidance of doubt, each of the initial budget of the Company attached as an
exhibit to the Unit Purchase Agreement and the budget of the Company for the
2013 fiscal year attached hereto as Schedule C is hereby deemed to have been
approved by the Board with the consent of the ArcLight Directors.”

 

(d)                                 The last proviso in the third sentence of
Section 6.5 of the LLC Agreement is hereby amended and restated in its entirety
as follows:

 

2

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“provided further, that if the Company is converted into a limited partnership
(or other entity) in the IPO Conversion, up to twenty-five percent (25%) of the
general partner (or similar or corresponding) interests in the limited
partnership (or other entity) may be set aside for management equity incentives
(the “Reserved Management Equity Pool”) to be issued at or following the initial
Qualified Public Offering to those employees, officers, directors or managers of
the Company or any Company Subsidiary who are designated by the Board or its
successor (by majority vote of the Board without any requirement that any of the
Members consent thereto), with each such grant from the Reserved Management
Equity Pool to be made in such amounts and subject to such terms and conditions
as may be determined by the Board or its successor (by majority vote of the
Board without any requirement that any of the Members consent thereto).”

 

(e)                                  Section 7.1 of the LLC Agreement is hereby
amended and restated in its entirety as follows:

 

“Except for Excluded Issuances, purchases of new Class A Common Units by the
Magnum Hunter Member and TransTex Members pursuant to Section 8.7(a) or (c) and
except as provided in this Article 7, if the Company or any Company Subsidiary
desires to issue and sell (i) any Equity Securities with rights and privileges
equivalent to the Preferred Units or any security convertible into or
exchangeable for such Equity Securities (the “Parity Securities”) or (ii) any
Equity Securities with rights and privileges junior to the Preferred Units or
any security convertible into or exchangeable for such Equity Securities (the
“Junior Securities” and, together with the Parity Securities, the “New
Securities”) to any Person or Persons (collectively, the “Subject Purchasers”)
prior to a Qualified Public Offering (other than issuances consistent with those
set forth in Section 4.2(d)(x)(2) hereof), then the Company shall offer such New
Securities to each of the Preferred Members and any Members holding Class A
Common Units received on a conversion of their Preferred Units (each, a
“Preemptive Right Holder” and together, the “Preemptive Right Holders”) by
sending written notice (the “New Issuance Notice”) to such Persons at least
twenty-five (25) days prior to the issuance and sale of the New Securities. The
New Issuance Notice shall state (i) the number of units or shares of New
Securities proposed to be issued and sold and the terms of such New Securities,
(ii) the purchase price per unit or share of the New Securities (the “Proposed
Price”) and the other terms and conditions of the purchase of such New
Securities, (iii) the proposed date on which the New Securities will be sold,
which shall be at least thirty (30) days after the receipt of the New Issuance
Notice by the Preemptive Rights Holder (the “New Issuance Closing Date”), and
(iv) each Preemptive Right Holder’s Proportionate Percentage.  For purposes
hereof, each Preemptive Right Holder’s “Proportionate Percentage” means, with
respect to any Preemptive Right Holder, the percentage of the New Securities
allocated to such Preemptive Right Holder to be determined as follows:

 

(a)                                 with respect to (i) any Securities, if
Magnum Hunter and/or the TransTex Members fail to fund the aggregate amount of
the MHR Commitment and the TransTex Commitment (or any portions thereof) that is
required to be funded pursuant to Section 8.7(c) hereof (and such failure has
resulted in the ArcLight Member having the right to fund any such amount not
funded by

 

3

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Magnum Hunter and/or the TransTex Members pursuant to the terms of
Section 8.7(c)), and (ii) any Parity Securities, at such Preemptive Right
Holder’s option:

 

(A)                               by dividing (1) the total number of Class A
Common Units then owned by such Preemptive Right Holder (including, if
applicable, Class A Common Units issuable upon conversion of Preferred Units),
by (2) the total number of Class A Common Units then owned by all Preemptive
Rights Holders (including, if applicable, Class A Common Units issuable upon
conversion of Preferred Units); or

 

(B)                               by dividing (1) the total number of Class A
Common Units then owned by such Preemptive Right Holder (including, if
applicable, Class A Common Units issuable upon conversion of Preferred Units),
by (2) the total number of Class A Common Units then outstanding (including, if
applicable, Class A Common Units issuable upon conversion of Preferred Units);
and

 

(b)                                 with respect to any Junior Securities (so
long as Magnum Hunter and/or the TransTex Members have funded the aggregate
amount of the MHR Commitment and the TransTex Commitment required to be funded
by them pursuant to Section 8.7(c) hereof), by dividing (i) the total number of
Class A Common Units then owned by the respective Preemptive Right Holder
(including, if applicable, Class A Common Units issuable upon conversion of
Preferred Units), by (ii) the total number of Class A Common Units then
outstanding (including, if applicable, Class A Common Units issuable upon
conversion of Preferred Units).

 

The rights of the Preemptive Right Holders under this Article 7 with respect to
any proposed issuance of New Securities may be waived in writing by Preemptive
Rights Holders owning at least a majority of the Class A Common Units owned by
all Preemptive Right Holders (including, as applicable, Class A Common Units
issuable upon conversion of Preferred Units).”

 

(f)                                   Section 8.2 of the LLC Agreement is hereby
amended and restated in its entirety as follows:

 

“8.2                         No Capital Calls.  Notwithstanding any other
provision of this Agreement, other than the initial Capital Contribution
referred to in Section 8.1 and as set forth in Section 8.7 and pursuant to and
in accordance with the terms of the Unit Purchase Agreement, no Member shall be
required to make any Capital Contribution to the Company without such Member’s
express written consent.”

 

(g)                                  A new Section 8.7 is hereby inserted in the
LLC Agreement as follows:

 

“8.7                         Future Capital Contributions.  Notwithstanding
anything to the contrary contained in this Agreement, but expressly subject to
the proviso set forth in Section 4.2(d), effective as of March 7, 2013, the
capital requirements of the Company shall be funded as follows:

 

4

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(a)                                 On March 7, 2013, Magnum Hunter shall fund a
capital contribution to the Company (in a manner that has been separately agreed
to by Magnum Hunter and the Company) in the amount of $30.0 million in exchange
for 1,500,000 newly issued Class A Common Units;

 

(b)                                 Following the capital contribution described
in Section 8.7(a) above, the ArcLight Member shall have the exclusive,
non-transferable right to fund the next $20.0 million of the Company’s capital
requirements in exchange for new Preferred Units issued to the ArcLight Member
pursuant to and in accordance with the Unit Purchase Agreement and
Section 3.2(c) of this Agreement.

 

(c)                                  With respect to any capital requirements of
the Company beyond those set forth in Section 8.7(a) and (b) above (“Additional
Capital Requirements”), (i) the ArcLight Member shall have the exclusive,
non-transferable right to fund up to 40% of any such Additional Capital
Requirements in exchange for new Preferred Units issued to the ArcLight Member
pursuant to and in accordance with the Unit Purchase Agreement and
Section 3.2(c) of this Agreement and (ii) Magnum Hunter and the TransTex Members
shall fund, pro rata on the basis of such Member’s then-current Percentage
Interest, 60% of any such Additional Capital Requirements (the “MHR Commitment”
and the “TransTex Commitment,” respectively) in exchange for new Class A Common
Units purchased by Magnum Hunter and the TransTex Members at a purchase price of
$20.00 per unit.  To the extent that (A) Magnum Hunter does not fund all or any
portion of the MHR Commitment or (B) the TransTex Members do not fund all or any
portion of the TransTex Commitment, Magnum Hunter or the TransTex Members, as
the case may be, shall have the right to fund any remaining portion of the
TransTex Commitment or the MHR Commitment, as applicable, in exchange for new
Class A Common Units purchased by such Member or Members at a purchase price of
$20.00 per unit. In the event that any portion of the MHR Commitment or the
TransTex Commitment continues to remain unfunded under this Section 8.7(c) after
giving effect to the immediately preceding sentence, the ArcLight Member shall
have the right to fund any remaining portion of the MHR Commitment and the
TransTex Commitment in exchange for new Preferred Units issued to the ArcLight
Member pursuant to and in accordance with the Unit Purchase Agreement and
Section 3.2(c) of this Agreement. This Section 8.7(c) shall terminate on the
earliest to occur of (x) the date on which the aggregate Additional Capital
Requirements funded by the Members pursuant to this Section 8.7(c) equal $70.5
million, (y) a Qualified Public Offering and (z) a Change of Control.  For
reference purposes only, attached as Exhibit C hereto is a pro forma schedule
reflecting, as of March 7, 2013, the ending capitalization of the Company
following the funding of all amounts contemplated by Sections 8.7(a)-(c). 
Notwithstanding anything in this Agreement to the contrary, the Members
acknowledge and agree that the ArcLight Member’s only remedies for any failure
by Magnum Hunter or the TransTex Members to fund the full amount of the MHR
Commitment or the TransTex Commitment, respectively, shall be (1) the ArcLight
Member’s right to fund any remaining portion of the MHR Commitment and the
TransTex Commitment in accordance with this Section 8.7(c) and (2) as otherwise
provided in Section 7.1.

 

5

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(d)                                 The Members acknowledge and agree that
Article 7 of this Agreement shall not apply to any purchase of new Class A
Common Units by Magnum Hunter and the TransTex Members pursuant to
Section 8.7(a) or (c).

 

(e)                                  Any capital requirements of the Company
beyond those set forth in Section 8.7(c) above shall be funded in accordance
with Sections 4.2 and 7.1.  Notwithstanding anything in this Agreement to the
contrary, following the funding of the Additional Capital Requirements set forth
in Section 8.7(c), the Board (by majority vote of the Board and without any
requirement that any of the Members consent thereto) will have the right to
cause the Company to issue Junior Securities (the proceeds of which may be used
for any purpose) and to amend this Agreement to the extent reasonably necessary
to reflect the terms thereof; provided, however, that Section 7.1 shall still
apply to any such issuance.”

 

(h)                                 A new Schedule C and a new Exhibit C shall
be attached to the LLC Agreement in the forms attached hereto as Exhibit A and
Exhibit B, respectively.

 

Section 3.                                           Ratification of LLC
Agreement.  Except as expressly modified and amended by this Amendment, all of
the terms and conditions of the LLC Agreement shall remain in full force and
effect and are hereby ratified and affirmed in all respects by the Members.

 

Section 4.                                           Counterparts.  This
Amendment may be executed in more counterparts, all of which shall be considered
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
parties.  The exchange of a fully executed Amendment (in counterparts or
otherwise) by facsimile or by electronic delivery in .pdf format shall be
sufficient to bind the parties to the terms and conditions of this Agreement.

 

Section 5.                                           Governing Law.  This
Amendment will be governed by and construed in accordance with the laws of the
State of Delaware.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first above written.

 

 

THE COMPANY:

 

 

 

EUREKA HUNTER HOLDINGS, LLC

 

 

 

 

 

 

By:

/s/ Ron Ormand

 

 

Name:

Ron Ormand

 

 

Title:

Vice President

 

 

 

 

 

MEMBERS:

 

 

 

MAGNUM HUNTER RESOURCES CORPORATION

 

 

 

 

 

 

By:

/s/ Ron Ormand

 

 

Name:

Ron Ormand

 

 

Title:

CFO and EVP

 

 

 

 

 

RIDGELINE MIDSTREAM HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Daniel R. Revers

 

Name:

Daniel R. Revers

 

Title:

Vice President

 

Signature page to
Second Amendment to Amended and Restated Limited Liability Company Agreement
of Eureka Hunter Holdings, LLC

 

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EXHIBIT A

 

Schedule C

 

2013 Budget

 

Attached hereto.

 

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Eureka Hunter Holdings LLC

Consolidated Operating Model

 

 

 

2013

 

($ in thousands)

 

Q1 - 2013

 

Q2 - 2013

 

Q3 - 2013

 

Q4 - 2013

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Reservation Revenue - Triad Volumes

 

$

1,013

 

$

1,024

 

$

1,157

 

$

1,219

 

$

4,412

 

Reservation Revenue - Third Party Volumes

 

$

528

 

$

642

 

$

1,214

 

$

1,214

 

$

3,599

 

Commodity Revenue - Triad Volumes

 

$

396

 

$

648

 

$

603

 

$

634

 

$

2,281

 

Commodity Revenue - Third Party Volumes

 

$

242

 

$

479

 

$

1,008

 

$

2,127

 

$

3,857

 

Overrun Revenue - Triad Volumes

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Overrun Revenue - Third Party Volumes

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Condensate Gathering Revenue

 

$

0

 

$

0

 

$

39

 

$

569

 

$

608

 

Dehydration Revenue

 

$

0

 

$

0

 

$

11

 

$

160

 

$

171

 

Carbide

 

$

387

 

$

1,241

 

$

1,742

 

$

2,239

 

$

5,609

 

Low Pressure

 

$

60

 

$

60

 

$

60

 

$

60

 

$

240

 

Rogersville Processing Plant

 

$

192

 

$

192

 

$

192

 

$

192

 

$

768

 

Other EHP Revenue

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Rental Revenue - Owned

 

$

1,531

 

$

1,885

 

$

1,916

 

$

2,058

 

$

7,391

 

Rental Revenue - Ops and Maint

 

$

486

 

$

510

 

$

513

 

$

593

 

$

2,103

 

Installation Revenue

 

$

448

 

$

125

 

$

281

 

$

431

 

$

1,286

 

Service Revenue

 

$

125

 

$

125

 

$

125

 

$

125

 

$

500

 

Other TransTex Revenue

 

$

1,388

 

$

0

 

$

0

 

$

0

 

$

1,388

 

Total Revenue

 

$

6,796

 

$

6,932

 

$

8,862

 

$

11,622

 

$

34,212

 

 

 

 

 

 

 

 

 

 

 

 

 

Field Operations Expense

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Gathering - Rental Equip

 

$

45

 

$

45

 

$

45

 

$

45

 

$

180

 

Oil & Gas Gathering - Insurance

 

$

60

 

$

60

 

$

60

 

$

60

 

$

240

 

Oil & Gas Gathering - Trucking

 

$

10

 

$

10

 

$

10

 

$

10

 

$

39

 

Oil & Gas Gathering - Utilities

 

$

2

 

$

2

 

$

2

 

$

2

 

$

8

 

Oil & Gas Gathering - Maint & Supplies

 

$

28

 

$

28

 

$

28

 

$

28

 

$

112

 

Oil & Gas Gathering - All Other

 

$

188

 

$

188

 

$

221

 

$

287

 

$

882

 

Terminal Opex

 

$

0

 

$

0

 

$

25

 

$

75

 

$

100

 

Carbide

 

$

355

 

$

712

 

$

746

 

$

962

 

$

2,775

 

O&M - Materials, Supplies & Filters

 

$

26

 

$

27

 

$

27

 

$

31

 

$

110

 

O&M - Chemicals & Water

 

$

140

 

$

147

 

$

148

 

$

171

 

$

607

 

O&M - Contractor Services

 

$

51

 

$

54

 

$

54

 

$

62

 

$

221

 

O&M - Subcontract Operator Labor

 

$

38

 

$

40

 

$

40

 

$

47

 

$

166

 

O&M - TransTex Labor

 

$

255

 

$

268

 

$

269

 

$

311

 

$

1,104

 

Warranty

 

$

84

 

$

84

 

$

84

 

$

84

 

$

336

 

Installation

 

$

358

 

$

100

 

$

225

 

$

345

 

$

1,028

 

Service

 

$

106

 

$

106

 

$

106

 

$

106

 

$

425

 

Service Center

 

$

45

 

$

45

 

$

45

 

$

45

 

$

180

 

Insurance - TransTex

 

$

119

 

$

119

 

$

119

 

$

119

 

$

475

 

Other

 

$

1,000

 

$

0

 

$

0

 

$

0

 

$

1,000

 

Total Expense

 

$

2,910

 

$

2,034

 

$

2,253

 

$

2,790

 

$

9,988

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

3,886

 

$

4,898

 

$

6,608

 

$

8,832

 

$

24,224

 

Gross Profit Margin %

 

57

%

71

%

75

%

76

%

71

%

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

 

 

 

 

 

 

 

 

 

Salaries and Benefits

 

$

955

 

$

1,173

 

$

1,251

 

$

1,254

 

$

4,633

 

Insurance

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Property Taxes

 

$

1

 

$

1

 

$

1

 

$

1

 

$

2

 

Professional Fees

 

$

250

 

$

581

 

$

189

 

$

127

 

$

1,147

 

Rent and Facilities

 

$

54

 

$

54

 

$

54

 

$

54

 

$

216

 

T&E & Automobile

 

$

113

 

$

113

 

$

113

 

$

113

 

$

450

 

Advertising & Marketing

 

$

6

 

$

6

 

$

6

 

$

6

 

$

24

 

Shared Services Chg

 

$

125

 

$

125

 

$

125

 

$

125

 

$

500

 

Other

 

$

29

 

$

29

 

$

29

 

$

29

 

$

114

 

Total SG&A

 

$

1,532

 

$

2,081

 

$

1,767

 

$

1,707

 

$

7,086

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

$

4,442

 

$

4,115

 

$

4,020

 

$

4,498

 

$

17,074

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

2,354

 

$

2,817

 

$

4,841

 

$

7,125

 

$

17,137

 

EBITDA Margin %

 

35

%

41

%

55

%

61

%

50

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Expenses

 

 

 

 

 

 

 

 

 

 

 

DD&A - Eureka Pipeline

 

$

1,744

 

$

2,293

 

$

2,806

 

$

3,147

 

$

9,989

 

DD&A - Carbide

 

$

111

 

$

167

 

$

167

 

$

167

 

$

611

 

DD&A - TransTex

 

$

1,009

 

$

1,020

 

$

1,028

 

$

1,036

 

$

4,093

 

Ohio Taxation

 

$

0

 

$

0

 

$

0

 

$

10

 

$

10

 

Interest expense

 

$

1,594

 

$

1,611

 

$

1,629

 

$

3,594

 

$

8,428

 

Capitalized Interest expense

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Preferred dividends

 

$

3,207

 

$

3,608

 

$

3,920

 

$

4,079

 

$

14,814

 

Less gain on sale

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Other

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Total Other Expenses

 

$

7,665

 

$

8,699

 

$

9,549

 

$

12,032

 

$

37,945

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

(5,311

)

$

(5,881

)

$

(4,708

)

$

(4,907

)

$

(20,807

)

 

--------------------------------------------------------------------------------

 

Eureka Hunter Holdings LLC

Consolidated Operating Model

 

 

 

2013

 

($ in thousands)

 

Q1 - 2013

 

Q2 - 2013

 

Q3 - 2013

 

Q4 - 2013

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Cash Flow Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating Cash Flow

 

$

(2,447

)

$

(2,402

)

$

(707

)

$

(558

)

$

(6,114

)

 

 

 

 

 

 

 

 

 

 

 

 

Investing Activities (Capex):

 

 

 

 

 

 

 

 

 

 

 

Eureka Hunter

 

$

(31,339

)

$

(35,148

)

$

(21,676

)

$

(18,415

)

$

(106,578

)

TransTex

 

$

(1,052

)

$

(477

)

$

(477

)

$

(477

)

$

(2,484

)

Acquisitions

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Other

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Other

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Cash Flow from Investing Activities

 

$

(32,391

)

$

(35,625

)

$

(22,153

)

$

(18,892

)

$

(109,062

)

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

Borrowings/(Repayment) of Senior Revolver

 

$

0

 

$

0

 

$

0

 

$

58,000

 

$

58,000

 

Borrowings/(Repayment) of Term Loan

 

$

0

 

$

0

 

$

0

 

$

(50,000

)

$

(50,000

)

ArcLight Preferred Equity

 

$

20,000

 

$

15,000

 

$

10,000

 

$

3,200

 

$

48,200

 

MHR Investment

 

$

0

 

$

22,500

 

$

15,000

 

$

4,800

 

$

42,300

 

Other

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Other

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Other

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Cash Flow from Financing Activities

 

$

20,000

 

$

37,500

 

$

25,000

 

$

16,000

 

$

98,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flow

 

$

(14,838

)

$

(527

)

$

2,139

 

$

(3,450

)

$

(16,676

)

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Cash Balance

 

$

19,338

 

$

4,499

 

$

3,972

 

$

6,112

 

$

19,338

 

Ending Cash Balance

 

$

4,499

 

$

3,972

 

$

6,112

 

$

2,662

 

$

2,662

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Revolver

 

 

 

 

 

 

 

 

 

 

 

Committed Amount

 

$

25,000

 

$

25,000

 

$

25,000

 

$

100,000

 

$

100,000

 

Beginning Balance

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Borrowings/(Payment)

 

$

0

 

$

0

 

$

0

 

$

58,000

 

$

58,000

 

Refinance Term Loan

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

Ending Balance

 

$

0

 

$

0

 

$

0

 

$

58,000

 

$

58,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitment Fee %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Libor

 

 

 

 

 

 

 

 

 

 

 

Spread

 

 

 

 

 

 

 

 

 

 

 

Interest Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Revolver Cash Interest Expense

 

$

31

 

$

32

 

$

32

 

$

574

 

$

669

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

50,000

 

$

50,000

 

$

50,000

 

$

50,000

 

$

50,000

 

Borrowings/(Repayment)

 

$

0

 

$

0

 

$

0

 

$

(50,000

)

$

(50,000

)

Ending Balance

 

$

50,000

 

$

50,000

 

$

50,000

 

$

0

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan Interest Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan Cash Interest Expense

 

$

1,563

 

$

1,580

 

$

1,597

 

$

269

 

$

5,009

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan Pre-Payment Penalty

 

$

0

 

$

0

 

$

0

 

$

2,750

 

$

2,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

153,458

 

$

173,458

 

$

188,458

 

$

198,458

 

$

153,458

 

Incremental Investment

 

$

20,000

 

$

15,000

 

$

10,000

 

$

3,200

 

$

48,200

 

Accrued Dividends

 

$

3,207

 

$

3,608

 

$

3,920

 

$

4,079

 

$

14,814

 

Less: Dividends

 

$

(3,207

)

$

(3,608

)

$

(3,920

)

$

(4,079

)

$

(14,814

)

Ending Balance

 

$

173,458

 

$

188,458

 

$

198,458

 

$

201,658

 

$

201,658

 

 

--------------------------------------------------------------------------------

 

Eureka Hunter CAPEX Schedule

 

($ in thousands)

 

Eureka Pipeline

 

2013

 

Carbide Facility

 

$

1,941

 

 

 

 

 

WV - Ritchie Lateral (Pipe)

 

$

0

 

WV - Ritchie Phase I (Mainline West Extension/CHK)

 

$

2,826

 

WV - Ritchie Phase II

 

$

7,710

 

WV - Ritchie Phase III (Highway 50)

 

$

0

 

WV - Ritchie Phase IV (Virco)

 

$

0

 

 

 

 

 

Liquids Handling Facility - Twin Hickory

 

$

1,500

 

 

 

 

 

Monroe OH - Eclipse (Pipe)

 

$

0

 

Monroe OH - Eclipse Dry System

 

$

35,901

 

Monroe OH - Eclipse Wet System

 

$

29,734

 

 

 

 

 

OH - Triad Ormet Lateral

 

$

14,390

 

 

 

 

 

Mobley Residue Line to TCO

 

$

12,475

 

 

 

 

 

Macksburg Lateral - TETCO

 

$

0

 

Macksburg Lateral - Kinder Morgan

 

$

0

 

 

 

 

 

Server (Accounting, nomination and measurement)

 

$

100

 

 

 

 

 

Other

 

$

0

 

Total Eureka Pipeline

 

$

106,578

 

 

 

 

 

 

TransTex

 

2013

 

Remaining 2012 Capex

 

$

0

 

Halcon Refridge Unit

 

$

575

 

JT Unit

 

$

3

 

JT Unit

 

$

6

 

JT Unit

 

$

6

 

Unit 022

 

$

18

 

Unit 018

 

$

18

 

Unit 033

 

$

18

 

Unit 038

 

$

18

 

Unit 293

 

$

18

 

Unit 291

 

$

29

 

Unit 292

 

$

29

 

Unit 44

 

$

50

 

Unit 45

 

$

50

 

Unit 46

 

$

29

 

Unit 294

 

$

58

 

Unit 003

 

$

87

 

Unit 019

 

$

87

 

Unit 47

 

$

132

 

Unit 001

 

$

173

 

Unit 42

 

$

175

 

Unit 36

 

$

260

 

Unit 29

 

$

260

 

Future Unit

 

$

0

 

Future Unit

 

$

0

 

Future Unit

 

$

0

 

Unit 41

 

$

0

 

10MMCFD Ref Plant

 

$

0

 

20MMCFD Ref Plant

 

$

0

 

60MMCFD Cryo Plant

 

 

 

Equipment yard (additional land purchase and facility improvements)

 

$

270

 

Trucks (4)

 

$

120

 

TransStar Acquisition

 

 

 

Other Capex

 

 

 

Total TransTex

 

$

2,484

 

 

 

 

 

Total CAPEX

 

$

109,062

 

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

Exhibit C

 

Pro Forma Capitalization Schedule

 

Attached hereto.

 

--------------------------------------------------------------------------------

 

Eureka Ownership

Ownership Schedule

 

 

 

Current

 

Capital Call

 

Pro Forma

 

Capital Call

 

Pro Forma

 

Capital Call

 

Capital Call

 

Pro Forma

 

 

 

Capitalization

 

MHR

 

Capitalization

 

ArcLight

 

Capitalization

 

ArcLight

 

MHR

 

Capitalization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Value

 

$

419,890,000

 

$

30,000,000

 

$

449,890,000

 

$

0

 

$

449,890,000

 

$

0

 

$

42,300,000

 

$

492,190,000

 

Net Debt

 

38,610,000

 

—

 

38,610,000

 

—

 

38,610,000

 

—

 

—

 

38,610,000

 

TEV

 

458,500,000

 

—

 

488,500,000

 

—

 

488,500,000

 

—

 

—

 

530,800,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Value

 

$

264,931,967

 

$

30,000,000

 

$

294,931,967

 

$

(20,000,000

)

$

274,931,967

 

$

(28,200,000

)

$

42,300,000

 

$

289,031,967

 

Preferred Equity Value

 

155,710,853

 

—

 

155,710,853

 

20,000,000

 

175,710,853

 

28,200,000

 

—

 

$

203,910,853

 

Total

 

420,642,820

 

30,000,000

 

450,642,820

 

—

 

450,642,820

 

—

 

42,300,000

 

492,942,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit Price

 

$

20.00

 

$

20.00

 

$

20.00

 

$

20.00

 

$

20.00

 

$

20.00

 

$

20.00

 

$

20.00

 

FD Shares

 

21,032,141

 

1,500,000

 

22,532,141

 

—

 

22,532,141

 

—

 

2,115,000

 

24,647,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Ownership (Shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MHR

 

12,720,993

 

1,500,000

 

14,220,993

 

(964,358

)

13,256,635

 

(1,359,744

)

2,115,000

 

14,011,891

 

Other Common Equity Owners (1)

 

525,605

 

—

 

525,605

 

(35,642

)

489,963

 

(50,256

)

—

 

439,707

 

ArcLight

 

7,785,543

 

—

 

7,785,543

 

1,000,000

 

8,785,543

 

1,410,000

 

—

 

10,195,543

 

Total

 

21,032,141

 

1,500,000

 

22,532,141

 

—

 

22,532,141

 

—

 

2,115,000

 

24,647,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Ownership (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MHR

 

60.48

%

 

 

63.11

%

 

 

58.83

%

 

 

 

 

56.85

%

Other Common Equity Owners (1)

 

2.50

%

 

 

2.33

%

 

 

2.17

%

 

 

 

 

1.78

%

ArcLight

 

37.02

%

 

 

34.55

%

 

 

38.99

%

 

 

 

 

41.37

%

Total

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

100.0

%

 

--------------------------------------------------------------------------------

(1) Assumes MHR is the only common equity owner that funds the common equity
capital call

 

--------------------------------------------------------------------------------