Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations |
Note 3 - Discontinued Operations
As discussed in detail in Note 2 - One Stone Exchange, on March 31, 2016, the Company entered into an Exchange Agreement with One Stone pursuant to which, subject primarily to stockholder approval, One Stone will transfer its ownership of 100% of Magellan's Series A Preferred Stock in exchange for 100% of Magellan's interest in the CO2 Business. The stockholders of Magellan will vote on the Exchange at a stockholder meeting that is expected to take place in June 2016. The Company has determined that it is probable that the Exchange will be approved by the stockholders. Therefore, assets and liabilities of the CO2 Business have been reclassified as held for sale in the accompanying condensed consolidated balance sheets, and recorded at their fair values, less the cost to sell at March 31, 2016.
The results of operations of the CO2 Business were reclassified to discontinued operations in the third quarter of fiscal year 2016. Prior period amounts related to discontinued operations in the unaudited condensed consolidated statement of operations and statement of cash flows have also been reclassified to conform to the current period presentation. Summarized results of the Company's discontinued operations are as follows:
The Company reviewed the recoverability of the carrying values of its assets and liabilities expected to be transferred to One Stone in the Exchange, and as a result of this review recorded an impairment of $11.3 million in discontinued operations for the three and nine months ended March 31, 2016, to adjust the carrying values of the exchanged assets and liabilities to their estimated fair values at March 31, 2016. The adjusted carrying amounts of the major classes of assets and liabilities included in discontinued operations are as follows:
Note Payable. The note payable included in liabilities held for sale of discontinued operations at March 31, 2016, and June 30, 2015, represents the Term Loan with WTSB as described below.
On September 17, 2014, the Company, through its wholly owned subsidiary NP, entered into a senior secured revolving loan facility (the "Revolving Loan Facility") with WTSB. The Revolving Loan Facility had a floating interest rate based on the prime rate with a floor rate of 3.25%, with interest payable quarterly, a maturity of September 30, 2015, and a total available borrowing limit of $8.0 million, of which $5.5 million was drawn as of June 30, 2015, when the Company entered into an amendment to the Revolving Loan Facility whereby the Revolving Loan Facility was converted into a single term loan (the "Term Loan"). The maturity of the Term Loan was extended to June 30, 2020 and bears interest at the prime rate plus 1.50% with an interest rate floor of 4.75%. The Term Loan is secured by substantially all of NP's assets and a guarantee of Magellan secured by a pledge of its membership interest in NP. During the first 12 months of the Term Loan, only monthly interest payments are payable. Principal is amortized over its remaining four-year term. Under the terms of the Term Loan, Magellan and NP are subject to certain restrictive covenants customary in similar loan agreements. At March 31, 2016, the Company was in compliance with all such covenants.
At the closing of the Exchange, One Stone will receive 100% of the outstanding membership interests in NP and therefore assume the obligations of the Term Loan. The closing of the Exchange is subject to the consent of WTSB to the release of the guarantee of the Term Loan provided by Magellan. See Note 2 - One Stone Exchange.
Contingent Production Payments.
The Company will retain potential future contingent production payments related to its September 2011 acquisition of NP. The contingent production payments are payable, up to a total of $5.0 million, if certain increased average daily production rates are achieved at the Poplar field. Based upon the latest reserves estimates available to the Company, the contingent production payments are unlikely to be paid, and therefore, are not recorded in the accompanying condensed consolidated financial statements.
Non-controlling Interest in Utah CO2 LLC
Pursuant to the Exchange, the Company will transfer its 51% interest in Utah CO2 to One Stone. The non-controlling interest in Utah CO2 has been included with liabilities held for sale in the condensed consolidated balance sheets for all periods presented, and its results of operations are included in discontinued operations in the accompanying statements of operations.
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